Expect the stock price of gm to increase
Course:- Financial Management
Reference No.:- EM13891884

Assignment Help
Assignment Help >> Financial Management

Suppose that I expect the stock price of GM to increase by about 15% over the next two months from $50 to $57.50. To monetize my view, I sell a put option on GM with 2 months to maturity with X= $57.50 and buy aput option again with 2 months to maturity on GM and X=50. Is this a proper strategy for me? Explain.

PS: In all questions above X = the exercise price of the options, C = call premium, P = put premium

plz show detailed answer

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
Assess the quality of the fit by computing the sum of square residuals. - Produce the plots of the first three additive terms in the projection pursuit regression formula.
When Marilyn Monroe died, ex-husband Joe DiMaggio vowed to place fresh flowers on her grave every Sunday as long as he lived. The week after she died in 1962, a bunch of fresh
What is the opportunity cost of a checking account that requires a $500 minimum balance to avoid service charges? Assume an interest rate of 4%. If you earn a 9% return on you
Unbiased Expectations Theory (LG6-5) Suppose we observe the 3-year Treasury security rate (1R3) to be 5 percent, the expected 1-year rate next year—E(2r1)—to be 5 percent, and
The market price is $900 for a 10-year bond that pays 8% interest semi annually. What is the bond's expected rate of return? If the required rate of return is 11%, is this bon
Jane Barhop purchased a stock for $45 one year ago. That stock is now worth $65. During the year, the stock paid a dividend of $2.50. What was Jane's total return from holding
The average annual return on the Standard and Poor's 500 Index from 1986 to 1995 was 15.8 percent. The average annual T-bill yield during the same period was 5.6 percent. What
You notice that Coca-Cola has a stock price of $ 40.49$40.49 and EPS of $ 1.84$1.84. Its competitor PepsiCo has EPS of $ 4.27$4.27. But, Jones Soda, a small batch Seattle-base