Trader ever exercise option and lose money on the trade

Assignment Help Financial Management
Reference no: EM13846385

A trader buys a call option with a strike price of $30 for $3. Does the trader ever exercise the option and lose money on the trade? Explain your answer.

Reference no: EM13846385

Questions Cloud

Assignment-boolean expressions : 1. Assignment 3:  Boolean Expressions
Suppose the average return on asset : Suppose the average return on Asset A is 6.9 percent and the standard deviation is 8.1 percent and the average return and standard deviation on Asset B are 4.0 percent and 3.5 percent, respectively. In a particular year, the return on Asset A was −4...
What is the fair price of share of royal bank stock : Royal Bank common shares pay dividends annually. They just paid a $1.50 dividend. Stock holders require a return of 12%. Royal is expected to continue paying dividends that will grow at 3.5% per annum in perpetuity. What is the fair price of a share ..
Define the four dimensions of social responsibility : Define the four dimensions of social responsibility and explain their impact on achieving a competitive advantage.
Trader ever exercise option and lose money on the trade : A trader buys a call option with a strike price of $30 for $3. Does the trader ever exercise the option and lose money on the trade? Explain your answer.
What is your account equity at this stock price : You short sold 600 shares of stock at a price of $43 and an initial margin of 60 percent. If the maintenance margin is 30 percent, at what share price will you receive a margin call? What is your account equity at this stock price?
Linear regression : The Electrocomp Corporation manufactures two electrical products: air conditioners and large fans. The assembly process for each is similar in that both require a certain amount of wiring and drilling. Each air conditioner takes 3 hours of wiring and..
What is the net present value of this car transaction : Suppose you want to buy a car for college. Your awesome uncle is willing to sell you his $20,000car which he no longer needs. He will only charge you 1% interest per year on the value of the car. Assuming 10 equal annual payments, what is the payment..
Calculate the expected annual loss for each exposure : Calculate the expected annual loss for each exposure and create a graph. Submit a report summarizing which points have the greatest vulnerability and provide recommendations.

Reviews

Write a Review

Financial Management Questions & Answers

  Discuss the concepts of marginal product and marginal cost

Discuss the concepts of marginal product and marginal cost. Also discuss the importance of trends in these and other economic measures and how time-series analysis (trend analysis) can be used or misused to make important management decisions.

  Average cost problem

Average cost of a desktop computer must be less than or equal to$2,100. using a sample of 64 retailers reveals a mean price of $1,951, with a standard deviation of $242. does the manager proceed with using a 5 percent significant level?

  Cash flows over the four-year life of the investment

An investment has an installed cost of $532, 800. The cash flows over the four-year life of the investment are projected to be $216,850, $233,450, $200,110, and $148, 820.

  What is the most willing to pay for gamma common stock now

You are considering the purchase of a share, gamma incorporate it common stock. You expect to sell it at the end of one year for $56 per share. You will receive $2.56 per share the end of the next year. If you're required return on the stock is 8.3% ..

  Equipment to actually produce widgets-submit a bid to supply

You are required to submit a bid to supply 200,000,000 widgets per year to the State of Illinois for the next five years. Your company has an idle tract of real estate that cost $1,500,000 ten years ago; if your company sold the land today, it would ..

  Construct a month by month index for the share portfolio

Construct a month by month index for the share portfolio, and graphically compare its performance to the All Ordinaries Index and other relevant market indicators.

  What is the dividend yield for each of these four stocks

Consider four different stocks, all of which have a required return of 17 percent and a most recent dividend of $4.50 per share. Stocks W, X, and Y are expected to maintain constant growth rates in dividends for the foreseeable future of 10 percent, ..

  Trade credit terms-annualized cost of forgoing the discount

If a firm buys trade credit terms of 4/10, net 60 and decides to forgo the trade credit discount and pay the next day, what is the annualized cost of forgoing the discount assuming a 360 day year?

  Calculating cost of debt

Calculating Cost of Debt. ICU Window, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with seven years to maturity that is quoted at 108 percent of face value. The issue makes semi annual payments and has an embed..

  The expected return on the market portfolio

The expected return on the market portfolio is 15%. The standard deviation of return on the market portfolio is 12%. Beta of stock A is 1.2 and the standard deviation of return on stock A is 18%. What could be the expected return of stock A?

  Amount of a possible future contingency

Many firms believe that it is very difficult to estimate the amount of a possible future contingency. Should a contingent liability be reported even when the dollar amount of the loss is not known? Should it be disclosed in the notes to financial sta..

  What is the future value and loan problem

What is the future value of $1800 invested today at 18% interest in 30 years with interest compounded quarterly? What is the present value of $6700 received 14 years from now using on the 11% interest or discount read with interest compounded quarter..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd