Using the parameters in Table 5.2 for the 45 day 82.50 covered call, analyze the following stop outs: exit the trade if the stock price falls to 79, to 78, to 77. What is the gain rate in each case?

Data given in Table 5.2

 

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In Table 5.2 we show simulation results for some covered call trades. Table 5.2 Gain expectation for covered call trades So $80.00, r= 1%, p= 4%, o = 20% Trade Time Price Amt at risk 82.50 call 82.50 call 82.50 call 85 call 85 call to expir. Total loss prob(%) 15 0.43 79.57 0+ 30 0.89 79.11 0+ 45 1.27 78.73 15 0.10 30 0.36 0.64 85 call 45 0+ 79.90 0+ 0+ 79.64 79.36 0+ Gain Ex- Gain prob pected rate. (%) gain (%) 56 0.110 59 0.200 61 0.295 52 0.121 54 56 0.242 0.337 4 3 3 4 4 3