What would be a simple options strategy to exploit

Assignment Help Finance Basics
Reference no: EM133432386

Question: The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next 3 months. You do not know whether it will go up or down, however. The current price of the stock is $95 per share, and the price of a 3-month call option at an exercise price of $95 is $6.00.

a. If the risk-free interest rate is 7% per year, what must be the price of a 3-month put option on P.U.T.T. stock at an exercise price of $95? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Calculate the put call parity put-call parity.

b. What would be a simple options strategy to exploit your conviction about the stock price's future movements. How far would it have to move in either direction for you to make a profit on your initial investment? (Round your intermediate calculations and final answer to 2 decimal places.)

Which strategy is this? (collar, covered call, protective put, spread, or straddle)

What is the price change for profit in this scenario?

Reference no: EM133432386

Questions Cloud

Types of integrated into the enterprise system in pepsico : What document management data and types of external files are integrated into the Enterprise system in pepsico?
What are some of the challenges and recommendation : What are some of the challenges and recommendation in conducting research and collecting data to answer the question below. Do primary care practices without
What is the number of customers waiting to get digital copy : what is the number of customers waiting to get a digital copy of the book? Please justify your answer by providing the relevant performance metric from
How will impact uber initiative to develop self-driving cars : While the pandemic had a negative impact on ridership, how do you think it will impact Uber's initiative to develop self-driving cars?
What would be a simple options strategy to exploit : What would be a simple options strategy to exploit your conviction about the stock price's future movements. How far would it have to move in either direction
Why is a qualitative methodology appropriate : Is a qualitative methodology appropriate? Why? in the article "Digital storytelling as critical narrative intervention with adolescent women of Puerto Rican
What is the enterprise value of leapfrog after taking : What is the enterprise value of LeapFrog after taking the debt? What is the value of LeapFrogs own belongings after the change?
What kind of immunodeficiency these children might have : Comment on what kind of immunodeficiency these children might have, and how it prevents the immune system from controlling infection with BCG.
What can organizations do to ensure compliance : What are those responsibilities and what can organizations do to ensure compliance? Be sure to include links to your articles.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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