The following table shows option quotes for the November soybean contract. Please create a bear spread. What...

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Finance

The following table shows option quotes for the November soybeancontract.
Please create a bear spread. What positions in what contractswould you take?
What is the cost of your position? (Remember, there are at leasttwo correct
combinations of strikes that you could use in this problem
Calls
Strike
Puts
52.5
910
31.25
47.5
920
35.25
43.75
930
43.75
38.25
940
45.75
34.5
950
51.75
Now with the same option quotes, create a long straddleposition. At the money is 930.
What positions in what contracts would you take?
What is the cost of your position?

Answer & Explanation Solved by verified expert

4.5 Ratings (752 Votes)


	BEAR SPREAD WITH PUTS

	Strategy:1	Premium
	Buy Put Option at Strike Price 930	-43.75
	Sell Put Option at strike Price 920	35.25
	Net Premium	-8.5
	Strategy 2	Premium
	Buy Put Option at Strike Price 930	-43.75
	Sell Put Option at strike Price 910	31.25
	Net Premium	-12.5
	Bear Spread is used when the trader expects share price willmove downwards
	Cost of position of Bear Spread Strategy1	8.5
	Cost of position of Bear Spread Strategy2	12.5

	LONG STRADDLE STRATEGY	Premium
	BUY Call option at strike price 930	-43.75
	BUY Put option at strike price 930	-43.75
	Net Premium	-87.5
	Long Straddle is used when the trader expects high volatility in share price .
	Cost of position Long Straddle	87.5

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Transcribed Image Text

The following table shows option quotes for the November soybeancontract.Please create a bear spread. What positions in what contractswould you take?What is the cost of your position? (Remember, there are at leasttwo correctcombinations of strikes that you could use in this problemCallsStrikePuts52.591031.2547.592035.2543.7593043.7538.2594045.7534.595051.75Now with the same option quotes, create a long straddleposition. At the money is 930.What positions in what contracts would you take?What is the cost of your position?

Calls	Strike	Puts
52.5	910	31.25
47.5	920	35.25
43.75	930	43.75
38.25	940	45.75
34.5	950	51.75