HW 6 - Derivatives

HW 6 - Derivatives - Homework 6 Derivatives Three Problems:...

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1 Homework 6 Derivatives Three Problems: adapted from the examples in Derivative lecture notes Problem 1: Example 1b. CALL OPTION – On May 1, I write a call option for $4 (call premium) … option gives me the obligation to deliver 1 share of common stock of Fedex stock for $50 (exercise price) if option purchaser demands it. The current price of Fedex is $50. Required: 1) Which way is the option purchaser (you) thinking Fedex stock price will go? 2) Several weeks later, the current price of Fedex is $40 (out of the money). Is the option a liability to me, though? Problem 2: Example 2a. PUT OPTION – On July 1, you purchase a put option for $2 (put premium) … option gives you the right to sell 1 share of common stock of Goldman Sachs for $50 (exercise price). The current price of Goldman Sachs stock is $50. The option lasts for 100 days. Required: 1) Which way is the option purchaser (you) thinking Goldman stock price will go? 2)
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HW 6 - Derivatives - Homework 6 Derivatives Three Problems:...

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