14. The following prices are available for call and put options on a FB stock priced at $150 with a standard deviation of 0.22. The risk-free rate is 0.01 (rc = 0.00995). The options have 133 days remaining (expiring in September). The Black-Scholes model was used to obtain the prices.
Exercise
Calls
Puts
140
14.03
3.53
150
8.20
7.66
160
4.33
13.75
Assume that each transaction consists of one contract (for 100 shares) unless otherwise indicated.
PLEASE ANSWER ALL PARTS
(1) Consider a bull money spread using the November 150/160 calls. How much will the spread cost?
(2) Consider a bull money spread using the Sep 150/160 calls. What is the profit if the stock price at expiration is $160?
(3) Consider a bull money spread using the Sep 150/160 calls. What is the breakeven point?
(4) Consider a bear money spread using the Sep 160/150 puts. How much will the spread cost?
(5) Consider a bear money spread using the Sep 160/150 puts. What is the profit if the stock price at expiration is $145?
(6) Consider a bear money spread using the Sep 160/150 puts. What is the breakeven point?
14. The following prices are available for call and put options on a FB stock priced at $150 with a standard deviation of 0.22. The risk-free rate is 0.01 (rc = 0.00995). The options have 133 days remaining (expiring in September). The Black-Scholes model was used to obtain the prices.
Exercise | Calls | Puts |
140 | 14.03 | 3.53 |
150 | 8.20 | 7.66 |
160 | 4.33 | 13.75 |
Assume that each transaction consists of one contract (for 100 shares) unless otherwise indicated.
PLEASE ANSWER ALL PARTS
(1) Consider a bull money spread using the November 150/160 calls. How much will the spread cost?
(2) Consider a bull money spread using the Sep 150/160 calls. What is the profit if the stock price at expiration is $160?
(3) Consider a bull money spread using the Sep 150/160 calls. What is the breakeven point?
(4) Consider a bear money spread using the Sep 160/150 puts. How much will the spread cost?
(5) Consider a bear money spread using the Sep 160/150 puts. What is the profit if the stock price at expiration is $145?
(6) Consider a bear money spread using the Sep 160/150 puts. What is the breakeven point?