标题: Q 45 on CFA LIII Sample exam [打印本页] 作者: mfleming1983 时间: 2013-4-22 12:56 标题: Q 45 on CFA LIII Sample exam
Strategy 1- Protective put with option strike of $95
Strategy 2 Covered Call using an option with a strike of $105.00
Strategy 3 Bear Spread using put options with $90.00 and $100.00 strikes
The question also provided option prices
The question asked , if the Mountain Hawk stock declines to $88.00, which dericatives strategy will most likely give the highest value at expiration.
If anyone has done this question, the answer givn was C.
Please explain why in calculating the VALUE AT EXPIRATION, we are taking account the option premiums.作者: cchang 时间: 2013-4-22 12:57
Value at expiration = Profit.作者: Colum 时间: 2013-4-22 12:57
CP
When and where does value at expiration =profit
Value at expiration is the value of the position at expiration.
Profit subtracts ay premiusm paid etc from the value at expiration.
This is clear in the CFA notation where VT is defined as value at expiration and pi is defined as profit作者: onelife1 时间: 2013-4-22 12:58
thanks for pointing that out.
did you contact them about a possible erratum.
What was the explanation they provided?
I am getting the covered call to be the one with max value at expiration. Was that your choice too?作者: comp_sci_kid 时间: 2013-4-22 12:58
I thought it was the put, I beleive that the $88 was the value at expiration so the value of the put was
88+(95-88) =95.
The value of the covered call would be
88+max(0,88-105)=88 and the value of the near is
Max(0,100-88)-max(0,90-88)=10
Let me know what you think作者: Darien 时间: 2013-4-22 12:59
yeah got it confused while writing it out.
did it as the put …
need to stop making these mistakes作者: neil1234 时间: 2013-4-22 12:59
ya value at expiration is Vt
and pro put offers highest value, bear put offers least
with the info given in this post, profit cannot be calculated作者: MiniMe7 时间: 2013-4-22 13:00
The question agve all the premiums for the options then asked for value at expiration. I was expalining to cp that value at expiration does not include any premiums and this question must have had some errata作者: bchadwick 时间: 2013-4-22 13:01
is this one of the online tests? from testtrac?作者: kkn006 时间: 2013-4-22 13:01
my cal
- Pro put: (long stock and long put)
value (total strategy) = loss from long stock + profit from put
-covered call: short call + long stock
value = loss from stock (partly covered by premium)
- bear spread (put) = long put high + short put low
value = put high - put low = 100 -90 = 10
thats C ?
ah ohhhhhhhhh
sorry, they say value…..)
so pro Put has value of 95 )作者: rkapoor 时间: 2013-4-22 13:02
I don’t understand how it’s not C. The question asked:
The question asked , if the Mountain Hawk stock declines to $88.00, which dericatives strategy will most likely give the highest value at expiration.
In other words, How much would you pay for those positions at time of expiry?
A) 7 bucks
B) nothing
C) 10 bucks作者: pimpineasy 时间: 2013-4-22 13:02
For a) are you saying since you own the stock - you are effectively paying only 7?
For b) you own the stock, sell a call - your final position is the stock you owned. Since Call is OTM - you pay 0 for the position?
For c) Value is 10.
And among the 3 - it is the biggest?
Jeff - what was the answer posted (correct answer description and reasoning)?
)