Call Premiums Put Premiums Strike Jan. Feb. Jan. Feb. 105 7.50 7.75 .50 .60 110 6.25 6.50 .65 .75 115 1.15 1.20 3.25 3.62 120 .75 .95 8.10 8.85 Suppose that you decided to set up a short strip position using the Jan....

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Finance

Call Premiums
Put Premiums
Strike
Jan.
Feb.
Jan.
Feb.
105
7.50
7.75
.50
.60
110
6.25
6.50
.65
.75
115
1.15
1.20
3.25
3.62
120
.75
.95
8.10
8.85
Suppose that you decided to set up a short strip position usingthe Jan. 105 options. Find your profit/loss if the stock trades for$110 when the options expire. Round intermediate steps to fourdecimals and your final answer to two decimals. Do not use thedollar sign when entering your answer.
Suppose that you decided to set up a long strap position usingthe Feb. 110 options. Find your profit/loss if the stock trades for$127 when the options expire. Round intermediate steps to fourdecimals and your final answer to two decimals. Do not use thedollar sign when entering your answer.
A hedge fund manager believed that DEF stock would be relativelystable over her investment horizon and decided to use the Feb 120options to create a straddle position based on her belief. If thestock trades for $127 when the options expire, what is herprofit/loss?
-90
90
280
-280
None of the above
Suppose that you decided to create a long strangle positionusing the 115 Feb call and the 110 Feb put when the stock pricetraded at $112. Find your profit/loss if the stock trades at $118when the options expire.
105
-105
605
-605
None of the above

Answer & Explanation Solved by verified expert

4.1 Ratings (654 Votes)

Short strip position using the Jan 105 options Short Sell ONE Call Strike 105 at premium 750 Short Sell TWO Puts Strike 105 at premium 052100 Total Premium Received7501850 Payoff for Short Call at Strike105 Assume SStock Price at expiration Payoff Min105S0 If S110 Payoff 1051105 Payoff for Short Put at Strike105 Assume SStock Price at expiration Payoff MinS1050 If S110 Payoff See Answer

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	Call Premiums	Put Premiums
Strike	Jan.	Feb.	Jan.	Feb.
105	7.50	7.75	.50	.60
110	6.25	6.50	.65	.75
115	1.15	1.20	3.25	3.62
120	.75	.95	8.10	8.85