Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. you believe that oil prices will be rising more th

You believe that oil prices will be rising more than expected, and that rising prices...

80.2K

Verified Solution

Question

Accounting

image
You believe that oil prices will be rising more than expected, and that rising prices will result in lower camnings for industrial companies that use a lot of petroleum-related products in their operations. You also believe that the effects on this sector will be magnified because consumer demand will fall sol prices rise. You locate an exchange traded fund, XLB, that represents a basket of industrial companies. You don't want to short the ETF because you don't have enough margin in your account. XLB is currently trading at $22.35. You decide to buy a put option for 100 shares) with a strike price of $23.90, priced at $1.27. it turns out that you are correct. At expiration, XLB strading at $20.10. Calculate your profit. (Click on the icon located on the top-right comer of the datatable below in order to copy its contents into a spreadsheet) XLB: Materials-322.35 Calls Puts Strike Expiration Price Strike Expiration Price $20.10 November 50 25 $20.10 November $1.63 $23.00 November 025 2290 November $1.27 The profit of the trade before trading costs is $(Round to the nearest cent)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students