Question 17. You have the following information: Put: X=$40, Premium=$4 Call: X=

Question

Question 17. You have the following information:

Put: X=$40, Premium=$4

Call: X=$50, Premium=$6

You bought the stock at $45

Scenarios: S=20, S=45, S=90

Given above information, please calculate the net payouts for a protective put strategy for each different scenario.

       -$9, -$4, $41

       $25, $0, $0

       -$5, $-9, $0

       $16, -$4, $45

Question 18. You have the following information:

Put: X=$40, Premium=$4

Call: X=$50, Premium=$6

You bought the stock at $45

Scenarios: S=20, S=45, S=90

Given above information, please calculate the net payouts for a covered call strategy for each different scenario.

       $6, $6, $11

       $6, $0, $51

       -$19, $6, $11

       -$19, $6, $51

       -$6, -$6,$45

Question 19. You have the following information:

Put: X=$40, Premium=$4

Call: X=$50, Premium=$6

You bought the stock at $45

Scenarios: S=20, S=45, S=90

Given above information, please calculate the net payouts for a collar strategy for each different scenario.

       -$3, $2, $7

       -$9, $6, $11

       $16, $2, $52

       -$4, $0, $6

Question 20. You have the following information:

S=65, X=60, T=1, r=0, C=7, P=4

Evaluating the situation from a Put-Call Parity framework, what steps would you take to implement an arbitrage strategy?

       Sell Call, Buy Put, Short Stock, Invest remainder

       Sell Call, Buy Put, Buy Stock, Borrow remainder

       Buy Call, Sell Put, Buy Stock, Borrow remainder

       Buy Call, Sell Put, Short Stock, Invest remainder

       Buy Call, Sell Put, Short Stock, Borrow remainder

Question 21. Given the information and the solution you found for Question #20, what is the arbitrage amount?

       If S>X, then $6 and if S<X, then $2

       If S<X or S>X, the arbitrage will be $4

       If S>X, then $3 and if S<X, then $7

       If S>X, then $2 and if S<X, then -$3

       If S<X or S>X, the arbitrage will be $2

Question 22. You have the following information:

S=26, X=20, T=2, r=3.4%, C=15, P=6

Evaluating the situation from a Put-Call Parity framework, what steps would you take to implement an arbitrage strategy?

       Sell Call, Buy Put, Buy Stock, Borrow remainder

       Sell Call, Buy Put, Short Stock, Invest reaminder

       Buy Call, Sell Put, Buy Stock, Borrow remainder

       Buy Call, Sell Put, Buy Stock, Invest remainder

       Buy Call, Sell Put, Short Stock, Invest remainder

Question 23. Using the information and the solution from Question #22, what would be the final arbitrage amount? (approximately)

       If S>X or S<X then the arbitrage will be $1.80

       If S>X then $9, if S<X then $6

       If S>X or S<X then the arbitrage will be $3

       If S>X then $3, if S<X then $6

       If S>X or S<X then the arbitrage will be $2.20

Explanation / Answer

-9,-4,41

s=20 then loss on own stock 25 -profit of put 40-4-20=16, net loss -9

s=45 then put premium is loss -4

s=90 then profit on own stock 45 - loss of put premiun, net gain 41

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