Tutorial+11_+Derivatives

Tutorial+11_+Derivatives - Tutorial 11: Option Markets,...

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Tutorial 11: Option Markets, Option Algebra and Synthetic Option Strategies Due Date : 10 August 2009 1. 1 Define the following terms associated with options: a. Option b. Exercise c. Strike price d. Expiration date e. Call option f. Put option 2. 2 Complete the following sentence for each of these investors: a. A buyer of a call options b. A buyer of a put options c. A seller (writer) of a call options d. A seller (writer) of a put options “The (buyer/seller) of a (put/call) option (pays/receives) money for the (right /obligation) to (buy/sell) a specified asset at a fixed price within a fixed period of time.” 3. Graphically demonstrate the profit/loss profiles of the long and short positions for the following two options : Option             Underlying                    Spot                 Strike              Expiration                     Type                                   Premium (Contract)     Call SASOL 400 450 30 Oct American R5000 Put SAB 28 30 31 Dec European R400 Note: Standard option contract size is on 100 shares In your answer: * Define the long and short positions for each option.
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This note was uploaded on 06/01/2011 for the course FIN 3026W taught by Professor Drtoerien during the Summer '09 term at University of Cape Town.

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Tutorial+11_+Derivatives - Tutorial 11: Option Markets,...

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