Exam 8: Options: Payoffs Trading Strategies

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:

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

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 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 long position in a strangle is:

You are long an at-the-money straddle on a stock index. Which of the following statements is valid?

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?

In a covered call strategy:

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

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?

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

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:

A long position in a bearish 90/100 call spread plus a long position in a bullish 90/100 put spread for the same maturity 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?

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?

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:

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 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?

Suppose you are short a call and long a put on the S&P 500 index with the same strike and same maturity. Then, you are essentially holding

Consider a condor made up of calls at strikes 90, 95, 100, 105, and a butterfly call spread at strikes 90, 97.5, 105. Which of the following statements is valid?