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review6 - of underlying asset is 109 3/8 d(6 pts From the...

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A10 (Word file) https://docs.google.com/leaf?id=1cRxT9wlHMQk3ndoulGqsHyxoeVRINKUnTwU3 a) (2pts) What two elements come with “writing” a Put? you have the right to sell the underlying asset and they have the obligation to buy it. Writing means you are selling it Isn’t this the other way around? If you “write” a Put, You have the Obligation to buy @ the strike price and the purchaser of the Put Option has the Right to sell @ the strike price. b) (2pts) Why did the $120 Put decline in value by $5.50 the reported day? because a put option will decline in value with an increase in the price or value of the underlying asset. c) (2pts) Which of the above calls were “in the money?” 95, 100, 105 why these? because the strike price is lower than the value of the underlying asset (see the tables: current value
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Unformatted text preview: of underlying asset is 109 3/8 d) (6 pts) From the above tables, estimate your wealth change on March 16, 2001 given you hedged your 1000 share long SUNW position Nov.7, 2000 using the cheapest “in the money” option. Explain your hedge. (Show your calculation work for partial credit.) buy the 110 at a cost of 7 ⅜, 1000 * 7 3/8 = 7375 whata? $139,000? What’s the answer?!?! 2) Assume you are long one T-bond at 6% with 20 years to maturity and a current price of 105:00. Using the “insert shape” tool, graph the value line for this long position. Graph the value line for a futures position hedge and the net wealth position on the graph below. Use different line forms and clearly label your lines (7 pts)...
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