A trader buys a call option with a strike price of $45 and a put option with a strike price of $40. Both options have the same maturity. The call costs $3 and the put costs $4. Draw a diagram showing the variation of the trader’s profit with the asset price. Please do not copy/paste other responses that are provided elsewhere.
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- If an investor places a sell order with a stop price. When the stop price occurs, the order will be executed as a market order at the dealer's next available bid price. Group of answer choices True FalseA trader buys a call option with a strike price of $45 and a put option with a strike price of $40. Both options have the same maturity. The call costs $4 and the put costs $5. Draw a diagram showing the variation of the trader’s profit with the asset price.The database is mentioned in the attachment:Ques) Draw a profit diagram for an investor in a call option with an exercise price of 64 that expires in March and explain the diagram. Undertake the same analysis for the writer of the call. Comment on the contention that options are a zero sum game for the writer and investor in options.
- a) Plot the payoff and profit of the following options based strategy: Buy 3 puts with strike 100, sell 4 puts with strike 110 and buy 1 put with strike 140. Explain all your calculations. b) If the price of the put with strike 100 is $8 and the price of the put with strike 140 is $16, what can you say about the price of the put with strike 110? ExplainForm profit and loss diagrams of the following options positions. Assume that all the positions have the same underlying asset and the same expiration date. a. Long a call with a strike price of $50 and long a put with a strike price of $50. 6. Long a call with a strike price of $50 and long a put with a strike price of $40. c. What would the diagrams of each of the preceding positions be if the long positions were changed to short positions?Consider a call and a put options with the same strike price and time to expiry. Given that the strike price is exactly equals to the forward price, then: A. Put and call have same premium B. The premium of the put is equal to the forward price C. The premium of the put is equal to the premium of the call plus the present value of the strike D. The premium of the call is equal to the forward price
- Compared to short hedging, the advantage to using a put option is: A. Put options involve a one-time fixed payment and no need for a margin account B. Put options provide a form of "price insurance" and protect from a worst case scenario C. Put options allow for additional price gains if futures market prices continue to increase D. All the above are advantages to using puts instead of short hedgingConsider a stock that pays no dividends on which a futures contract, a call option, and a put option trade. The maturity date for all three contracts is T, the exercise price of both the put and the call is X, and the futures price is F. Show that if X = F, then the call price equals the put price. Use parity conditions to guide your demonstration.To replicate a short asset position with options a trader would: Short two ATM call contracts and buy one ITM put contract Short an ATM call and long ATM put Long an ATM call and short an ATM put Short a futures contract and long an ATM put
- Compared to long hedging, the advantage to using a call option is: A. Call options involve a one-time fixed payment and no need for a margin account B. Call options provide a form of "price insurance" and protect from a worst case scenario C. Call options allow for additional price gains if futures market prices continue to decline D. All the above are advantages to using puts instead of short hedgingTopic: Option Pricing When computing, please do not round off. Only final answers must be rounded off to two decimal places Based on the table, compute the 2. value of the put option.2. Graph a call to buy option and explain how its payoff is given. Explain when it is in the money, at the money and out of the money.