pls show full working Consider the following options portfolio. You write a call option on IBM with exercise price$85. You also write an IBM put option with exercise price $80. The price of the call option is $0.95and the price of the put is $2.45. Will you exercise your option if IBM is selling at $83 on the optionmaturity date? What will be your loss/profit? What if IBM is selling at $90?

In writing call will give you profit when prices goes below exercise price and writing put will give…

onsider the following options portfolio. You write a call option on IBM with exercise ou also write an IBM put option with exercise price $80. The price of the call option is e price of the put is $2.45. Will you exercise your option if IBM is selling at $83 on the ty date? What will be your loss/profit? What if IBM is selling at $90?

onsider the following options portfolio. You write a call option on IBM with exercise ou also write an IBM put option with exercise price $80. The price of the call option is e price of the put is $2.45. Will you exercise your option if IBM is selling at $83 on the ty date? What will be your loss/profit? What if IBM is selling at $90?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Consider the following options portfolio. You write an August expiration call option on IBM with exercise price $150. You write an August IBM put option with exercise price $145.a. Graph the payoff of this portfolio at option expiration as a function of IBM’s stock price at that time.b. What will be the profit/loss on this position if IBM is selling at $153 on the option expiration date? What if IBM is selling at $160? c. At what two stock prices will you just break even on your investment?d. What kind of “bet” is this investor making; that is, what must this investor believe about IBM’s stock price to justify this position?
Suppose you construct a strategy based on options on a stock that is currently selling for $100. The strategy is as follows: Buy one call option having an exercise price of $95. Sell two calls having an exercise price of $100. Buy one call option having an exercise price of $105. All of the options are written on the same stock and all have the same expiration date. Compute the payoff (the dollars you receive) from this strategy at the expiration date for each of the following alternative stocks prices: $90, $95, $98, $100, $102, $105, and $110. What additional information would be required to determine whether your strategy had been profitable? What is the name of this strategy?
Put together a Black–Scholes option calculator in Excel to answer the following.(a) What is the call-option value withS0 = $45, K = $48, r = 6%, T = 15 months,and volatility = 40%?(b) What is the put-option value withS0 = $60, K = $65, r = 6%, T = 18 months,and volatility = 20%?(c) What is the put-option value withS0 = $38, K = $40, r = 6%, T = 3 months,and volatility = 60%?(d) What is the call-option value withS0 = $100, K = $95, r = 8%, T = 3 years,and volatility = 40%?
Calculate the Black-Scholes price of a Call option where: S = $50 K = $45 T-t=.25 O = .20 r= .03 Show your work.
You buy a put option on IBM common stock. The option has an exercise price of $136 and IBM’s stock currently trades at $140. The option premium is $5 per contract.a. What is your net profit on the option if IBM’s stock price increases to $150 at expiration of the option and you exercise the option? b. How much of the option premium is due to intrinsic value versus time value?c. What is your net profit if IBM’s stock price decreases to $130?d. Draw the payout diagram at maturity on a short put option position, option premium = $2, and the same exercise price... (Please give the full solution I will upvote)
A call option with a strike price of $50 costs $2. A put option with a strike price of $45 costs $3. Construct the profit table and graph from buying these two together. This strategy is called Strangle. Explain why would an investor invest in a Strangle.
Suppose that you purchased a call option on the S&P 100 Index. The option has an exercise price of 1,680, and the index is now at 1,720. What will happen when you exercise the option? You will have to pay $1,680. You will receive $4,000. You will receive $1,680. (WRONG) You will have to pay $4,000. You will receive $ 1,720. (WRONG)
A call option with X = $50 on a stock currently priced at S = $55 is selling for $10. Using a volatility estimate of σ = .30, you find that N(d1 ) = .6 and N(d2 ) = .5. The risk-free interest rate is zero. Is the implied volatility based on the option price more or less than .30? Explain.
A call option with a strike price of $50 costs $2. A put option with a strike price of $45 costs $3. Explain how a strangle can be created from these two options. What is the pattern of profits?
Suppose you want to establish a bullish spread strategy. The are two call options. The first one has X1=$50 and C1=$5. The second one has X2=$42 and C2=$6. When the underlying asset price is S(t)=$45, what is the profit from the strategy? What is the maximum profit of the strategy? What is the minimum payoff of the strategy?
You are using a two-step binomial tree to estimate the price of a put option on MCD. The strike price of the put option is $22. The price of MCD today is $32. The risk-free rate is 5%. What is the price of the put? Round your solution to the nearest three decimals if needed (Le. 2.312). Please do not type the $ symbol. u-3 d= 0.59 Click on the arrow next to the file below. Next, create a new sheet in the Respondus LockDown Browser spreadsheet. You can use this blank spreadsheet to calculate the answer. Blank Spreadsheet.xisx
A call option costing $6 and a put option costing $4 are available, both with a strike price of $60. You decide to purchase both together such that your total cost will be $10. Given this information; Complete the table below: Stock Price $45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 65 69 70 75 80 85 90 95 100 Intrinsic Value of the Call Call Profit Intrinsic Value of the Put Put Profit Total Payoff Total Profit

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