AIM 3: Compute the pay-offs of various spread strategies.
1、Assume that the current price of a stock is $100. A call option on that stock with an exercise price of $97 costs $7. A call option on the stock with the same expiration and an exercise price of $103 costs $3. Using these options what is the profit for a long bull spread if the stock price at expiration of the options is equal to $110?
The buyer of a bull spread buys the call with an exercise price below the current stock price and sells the call option with an exercise price above the stock price. Therefore, for a stock price of $110 at expiration of the options, he gets a payoff $13 from his long position and a payoff of -$7 from his short position for a net payoff of $6. The cost of the strategy is $4. Hence the profit is equal to $2.
2、Assume that the current price of a stock is $100. A call option on that stock with an exercise price of $97 costs $7. A call option on the stock with the same expiration and an exercise price of $103 costs $3. Using these options what is the cost of entering into a long bull spread on this stock?
The buyer of a bull spread buys the call with an exercise price below the current stock price and sells the call option with an exercise price above the stock price. The cost of the strategy is the difference between the cost of buying the option with the lower exercise price and selling the option with the higher exercise price which is $7 - $3 = $4 to enter into this strategy.
3、Assume that the current price of a stock is $100. A call option on that stock with an exercise price of $97 costs $7. A call option on the stock with the same expiration and an exercise price of $103 costs $3. Using these options what is the expiration profit of a bear call spread if the stock price is equal to $110?
The trader of a bear call spread sells the call with an exercise price below the current stock price and buys the call option with an exercise price above the stock price. Therefore, for a stock price of $110 at expiration of the options, the buyer realizes a payoff of -$13 from his short position and a positive payoff of $7 from his long position for a net payoff of -$6. The revenue of the strategy is $4. Hence the profit is equal to -$2.
A long straddle consists of a long call and put with the same exercise price and the same expiration, at a stock price of $125 the put will expire worthless and the call value will be $25.
发表于 2009-6-25 13:30
|