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Finance 2 Group A FINE12214 (202500-4104)
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• If you believe share price will increase, which of the following is NOT a good strategy?
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* Suppose you have 1 share of General Electric. The current share price is $30. You want to make sure that the value of your portfolio will not be below $20 after 6 months from today. How can you achieve this objective using options?
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• If you believe share price will decrease, which of the following is NOT a good strategy?
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* A trader buys a call option with a strike price of $45 and a put option with a strike price of $40. Both options have the same maturity. What is the payoff on the exercise date if the share price is $38?
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* The potential loss for a writer of a put option on a stock is
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* You buy one Xerox call option, exercise price $60, and one Xerox put option, exercise price $60. The call premium is $5 and the put premium is $3. At expiration, the stock price is equal to $68. Calculate your total profit/loss.
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* You buy one Xerox call option, exercise price $60, and one Xerox put option, exercise price $60. The call premium is $6 and the put premium is $2. At expiration, you break even (i.e. profit is zero) if the stock price is equal to
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* Suppose you purchase one IBM call option, exercise price $110, at premium $5, and sell a call option, exercise price $120, at premium $2. The maximum potential PAYOFF of your strategy is ________.
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* The maximum loss a buyer of a stock put option can suffer is equal to
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* Suppose you purchase one IBM call option, exercise price $110, at premium $5, and sell a call option, exercise price $120, at premium $2. If, at expiration, the price of a share of IBM stock is $116, your profit would be
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