Expected value of the option profit

Reference no: EM131009013

A day trader buys an option on a stock that will return $100 profit if the stock goes up today and lose $400 if it goes down. If the trader thinks there is a 75% chance that the stock will go up,

a) What is her expected value of the option's profit?

b) What do you think of this option?accommodations; 40% will choose the Overnight Plan, which includes one night at the resort; and 40% will choose the Weekend Plan, which includes two nights.

a) Find the expected value of the number of nights poten- tial customers will need.

b) Find the standard deviation of the number of nights potential customers will need.

Reference no: EM131009013

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