Questions from Business Statistics

Q: Explain conceptually the choice of strike prices when it comes to designing

Explain conceptually the choice of strike prices when it comes to designing a zero-cost collar. Specifically, address the costs and benefits of two strategies. One strategy has a higher put strike pri...

Q: Pear, Inc. is presently trading at $100 per share

Pear, Inc. is presently trading at $100 per share; at-the-money one-month calls are trading at $5.43, and puts are trading at $5.01; and at the-money two-month calls are trading at $7.72, and puts are...

Q: Buy 100 shares of stock and write one October 170 call contract

Buy 100 shares of stock and write one October 170 call contract. Hold the position until expiration. Determine the profits and graph the results. Identify the breakeven stock price at expiration, the...

Q: Another variation of the straddle is called a strangle. A strangle

Another variation of the straddle is called a strangle. A strangle is the purchase of a call with a higher exercise price and a put with a lower exercise price. Evaluate the strangle strategy by exami...

Q: Many option traders use a combination of a money spread and a

Many option traders use a combination of a money spread and a calendar spread called a diagonal spread. This transaction involves the purchase of a call with a lower exercise price and longer time to...

Q: The chapter showed how analyzing a box spread is like a capital

The chapter showed how analyzing a box spread is like a capital budgeting problem using the NPV approach. Consider the internal rate of return method of examining capital budgeting problems and analyz...

Q: Construct a bear money spread using the October 165 and 170 calls

Construct a bear money spread using the October 165 and 170 calls. Hold the position until the options expire. Determine the profits and graph the results. Identify the breakeven stock price at expira...

Q: Repeat problem 6, but close the position on September 20.

Repeat problem 6, but close the position on September 20. Use the spreadsheet to find the profits for the possible stock prices on September 20. Generate a graph and use it to identify the approximate...

Q: Assume that on March 16, the cheapest bond to deliver on

Assume that on March 16, the cheapest bond to deliver on the June Treasury bond futures contract is the 14s, callable in about 19 years and maturing in about 24 years. Coupons are paid on November 15...

Q: Construct a collar using the October 160 put. First, use

Construct a collar using the October 160 put. First, use the Black–Scholes–Merton model to identify a call that will make the collar have zero up-front cost. Then close the position on September 20. U...