Evaluate the performance of the strategy at maturity

Assignment Help Financial Management

Reference no: EM131990097

Apple Inc. (AAPL) is currently trading at $442. The market prices for January 21, 2017 maturity Apple

options are as follows:

Strike Call Price Put Price Strike Call Price Put Price

$430 $14.70 $1.61 $455 $1.59 $13.35

$435 $10.55 $2.70 $460 $0.86 $18.00

$440 $7.15 $4.38 $465 $0.46 $22.55

$445 $4.65 $6.80 $470 $0.26 $26.20

$450 $2.78 $9.85 $475 $0.15 $30.65

Consider the following strategy that longs put options at strike K 3 = $450 and K 2 = $440, shorts put options at strike K 1 = $435 and K 4 = $455. [HINT: This strategy is a variant of the butterfly put spread]

? Part A: Draw the Profit Diagram (with option premiums) of the Strategy over the underlying asset price at option expiration date.

? Part B: Evaluate the performance of the strategy at maturity. That is, find out the max loss, max gain and the two breakeven points of the strategy.

Reference no: EM131990097

Questions Cloud

Calculate payback period for project : X-treme Vitamin Company is considering two investments, both of which cost $38,000. Calculate the payback period for Project A and Project B.

Sensitivity of ocf to changes in the variable cost figure : Calculate the break even point. What is the sensitivity of OCF to changes in the variable cost figure? (OCF/VC)

Design debit ratio spread strategy : Design a debit ratio spread strategy, using just two strikes, that Is most suitable given the specifics of your expectations and investment goal/risk preference

Alternative would you select under payback method : Which alternative would you select under the payback method?

Evaluate the performance of the strategy at maturity : Evaluate the performance of the strategy at maturity. That is, find out the max loss, max gain and the two breakeven points of the strategy.

Yield curve consistent with three term structure theories : Draw a yield curve with these data. Is your yield curve consistent with the three term structure theories?

Risky investments may produce large gains : Sansa owns two investments, A and B, that have combined value of $20,000. Risky investments may produce large losses. Risky investments may produce large gains

What is the current value of one share of tortoise company : What is the current value of one share of Tortoise Company? What will be the value of a share in year 6?

What is epson cost of debt : What is Epson's (pre-tax) cost of debt?

User Account

All Pages