Exam 8: Options: Payoffs Trading Strategies

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

(Multiple Choice)

4.9/5

(74)

Question 21

The three-month 90-strike put is priced at $2 and the three-month 100-strike put is priced at $7. What is the maximum possible net payoff on a bearish vertical spread using these options?

(Multiple Choice)

4.9/5

(86)

Question 22

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:

(Multiple Choice)

4.8/5

(81)

Question 23

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,

(Multiple Choice)

4.9/5

(85)

Question 24

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:

(Multiple Choice)

4.7/5

(89)

Question 25

Showing 21 - 25 of 25

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

The three-month 90-strike put is priced at $2 and the three-month 100-strike put is priced at $7. What is the maximum possible net payoff on a bearish vertical spread using these options?

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:

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,

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:

Overview

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Pricing Forwards and Futures I

Pricing Forwards Futures II

Hedging With Futures Forwards

Interest-Rate Forwards Futures

Options Markets

No-Arbitrage Restrictions

Early-Exercise Put-Call Parity

Option Pricing: an Introduction

Binomial Option Pricing

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The Black-Scholes Model

Mathematics of Black-Scholes

Beyond Black-Scholes

The Option Greeks

Path-Independent Exotic Options

Exotic Options II: Path-Dependent Options

Value at Risk

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