15. 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.
(1) Suppose you expect the stock price to remain at about $150 and decides to execute a butterfly spread using the September calls. What will be the cost of the butterfly spread?
(2) Suppose you execute a butterfly spread using the September calls. What will be the profit if the stock price at expiration is $150?
(3) Now suppose you construct a long straddle using Sep 150 call and 150 put. What will the straddle cost?
(4) Suppose you construct a long straddle using Sep 150 call and 150 put. What is the profit if the stock price at expiration is at $170?
(5) Now suppose you construct a long strangle using September 160 call and 140 put. What will the strangle cost?
(6) Suppose you construct a long strangle using September 160 call and 140 put. What is the profit if the stock price at expiration is at $135?
15. 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.
(1) Suppose you expect the stock price to remain at about $150 and decides to execute a butterfly spread using the September calls. What will be the cost of the butterfly spread?
(2) Suppose you execute a butterfly spread using the September calls. What will be the profit if the stock price at expiration is $150?
(3) Now suppose you construct a long straddle using Sep 150 call and 150 put. What will the straddle cost?
(4) Suppose you construct a long straddle using Sep 150 call and 150 put. What is the profit if the stock price at expiration is at $170?
(5) Now suppose you construct a long strangle using September 160 call and 140 put. What will the strangle cost?
(6) Suppose you construct a long strangle using September 160 call and 140 put. What is the profit if the stock price at expiration is at $135?