5) You bought 100 Google Shares for $400. You also bought 1 put option on Google with a strike of $395 for $20.
a) What is the maximum loss on your position?
b) What is the profit on your position when the stock hits $440?
c) Draw the profit/loss diagram for this position clearly marking the maximum loss, and breakeven.
5) You bought 100 Google Shares for $400. You also bought 1 put option on Google with a strike of $395 for $20.
a) What is the maximum loss on your position?
b) What is the profit on your position when the stock hits $440?
c) Draw the profit/loss diagram for this position clearly marking the maximum loss, and breakeven.
Related questions
Refers to the information below:
| S&R index level today (t=0) | 900 |
| Forward price (T=3 months) | 918 |
| Annualized 3-month interest rate | 8% p.a. |
| Call option Premium (Strike = 900) | 62.57 |
| Put option Premium (Strike = 900) | 44.92 |
| Dividend Yield | 0% |
| S&R index level 3 months later | 930 |
(i) What is your profit 3 months later if you have taken a longposition on the stock at t=0?
(ii) What is your profit 3 months later if you have taken ashort position on the stock at t=0?
(iii) What is your payoff 3 months later if you have taken along position on the forward at t=0?
(iv) What is your profit 3 months later if you have taken ashort position on the forward at t=0?
(v) What is your payoff 3 months later if you have taken a longposition on the call option at t=0?
(vi) What is your profit 3 months later if you have taken a longposition on the call option at t=0?
(vii) What is your maximum profit 3 months later if you havetaken a long position on the call option at t=0?
(viii) What is your maximum loss 3 months later if you havetaken a long position on the call option at t=0?
