Exam 8: Options: Payoffs Trading Strategies

Suppose your portfolio consists of one share of Goldman Sachs (GS)and a European put option on GS with a strike of $105 and a maturity of a year.At maturity,the value of your portfolio must be

If you go short a covered call and buy a protective put portfolio on a given stock (with the options having the same strike and maturity),what you have is

The FTSE index is at 5,100.You are short a straddle on the FTSE 100 struck at 5,100 and long a 5,000/5,200 strangle.If volatility were to increase,

Consider a ratio spread comprising a call at strike $K _ { 1 }$ and short two calls at strike $K _ { 2 } > K _ { 1 }$ .The current stock price is at $K _ { 1 }$ .The market view for this trade is most likely to be:

The 90-,100-,and 110-strike calls are trading at $12,$5,$3,respectively.The stock price is at $100.What is the maximum net payoff on a long butterfly spread using these options?

A stock is currently trading at $50.A one-year at-the-money put costs $10.The stock price at the end of one year can be equally likely to be one of the following three values: {20,50,80}.What is the expected one-year return of a protective put portfolio?

The combination of a position in a covered call and a position in a protective put on a stock index (where the options have the same strike and maturity)is similar to:

You anticipate a recession with increased stock volatility and greater negative skewness in stock prices.Which of the following option positions would be most consistent with your view?

If you are interested in creating a retirement portfolio where the downside is protected and you retain at least some upside,the following portfolio will be consistent with your goal:

The FTSE index is at 5,100.You are short a straddle on the FTSE 100.struck at 5,100 and long a 5,000/5,200 strangle.You are also short a 5,000-5,100-5,200 butterfly.Ceteris paribus,an increase in the level of the FTSE

A stock is currently trading at a price of 22.You observe the following prices for European call options on the stock (the strikes are in parentheses): $C ( 20 ) = 3.25$ , $C ( 22 ) = 1.95$ ,and $C ( 24 ) = 0.40$ .You can conclude from this that

A stock is currently trading at a price of 22.You observe the following prices for European put options on the stock (the strikes are in parentheses): $C ( 20 ) = 3.35$ and $C ( 22 ) = 1.95$ .Given this information,you can conclude that the minimum price of the 24-strike call consistent with no-arbitrage is

In a covered call strategy:

Consider a long position in a 100-strike straddle added to a short position in a 90/110-strike strangle.The underlying is a stock index.This is equivalent to:

A combination of a long position in a strip and a long position in a strap for the same strike and maturity (and with similar but opposite proportions of calls and puts)is similar to:

A long position in a strangle is:

What happens to the long position in a 90-100-110-strike call butterfly spread if all the calls are replaced with puts of identical strike and maturity?

The three-month 90-strike call is priced at $5 and the three-month 100-strike call is priced at $3.What is the maximum possible net payoff on a bullish vertical spread using these options?

The 90-,100-,and 110-strike calls are trading at $12,$5,$3,respectively.The stock price is at $100.What is the maximum net payoff on a short butterfly spread using these options?

Consider a position in a long straddle at strike 90 and a short straddle at strike 100,both for the same maturity.which of the following properties is valid for this position?