428_PS6_S09 - AEM 428 Spring 2009 Professor Manny Dong...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
AEM 428 Due on April 16 Spring 2009 Professor Manny Dong Optional Problem set 6 1) Each option contract is for 100 shares. Calculate your total profit or loss (at the time when the options expire or when the option positions are closed out) for each of the following scenarios. 1a At time 0, the price of IBM is S 0 = $85.10. You sell 2 call option contracts with strike price X = $85.00 for the price of $3.70 (per share). When the options expire 2 months later, the spot price of IBM is $75.00. 1b Same as (1a), except that the spot price 2 months later is $105. 1c. Same as (1a), except that you close out your options 1 month later when the call price is $4.00. 1d At time 0, the price of MSFT is S 0 = $56.00. You buy 5 put contracts with strike price X = $45.00 for the price of $1.05. When the options expire 3 months later, the spot price of MSFT is $60.04. 1e. Same as (1d), except that the spot price of MSFT at the time the put options expire is $42.20. 2) For each of the following scenarios, first draw the payoff of each instrument at expiration and
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/23/2009 for the course AEM 4280 taught by Professor Ng,d. during the Spring '08 term at Cornell University (Engineering School).

Page1 / 2

428_PS6_S09 - AEM 428 Spring 2009 Professor Manny Dong...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online