Finance/ Future and Options
Turki27
Prob5and6.docx5. Consider the following option chain for a stock trading at $45.80 per share:
|
CALLS |
|
PUTS |
||
|
BID |
ASK |
STRIKE |
BID |
ASK |
|
14.00 |
17.70 |
30 |
0.30 |
0.75 |
|
9.40 |
12.80 |
35 |
0.80 |
0.90 |
|
5.60 |
7.00 |
40 |
0.90 |
1.00 |
|
2.05 |
3.50 |
45 |
1.50 |
2.95 |
|
0.35 |
1.65 |
50 |
4.70 |
5.90 |
|
0.20 |
0.60 |
55 |
8.80 |
10.20 |
|
0.10 |
0.50 |
60 |
13.50 |
15.00 |
You are bullish on the stock. Find the value of each of the following spreads:
1. 45-50 bull put spread: $_______________
2. 40-45 bull put spread: $_______________
3. 40-45 bull call spread: $_______________
4. 45-50 bull call spread: $_______________
6. Refer to the information in the problem above. If the stock has a 50% chance of being priced at $47.50 or less by expiry, and a 20% chance of being priced at $50.00 or more by expiry, which option spread has the highest expected value, 1, 2, 3, or 4? What is its expected value?
