1. In general, what is an option and what differentiate it from other types of financial securities?...
Question:
1. In general, what is an option and what differentiate it from other types of financial
securities? What are some examples of options commonly encountered in the world of
investment and finance?
2. Can these options of selected stock of galaxy dividend income growth fund be valued using conventional discounted cash flow techniques? Why not?
3. Suppose the galaxy Dividend income growth fund already owns JP Morgan, Facebook
stock and receives a report casting doubt on the company's near-term performance. How
might it use options to protect itself from price declines over the next few months?
Examine the protective-put position
Examine the covered-call position
Each of these strategies offers us different types of protection. How should we choose
between them?
4. It is sometimes said that equity itself is like a call option on the firm. In what sense is this
true? Can real investment opportunities be valued as options?
5. Develop the hybrid option strategy that can be adopted by galaxy dividend income growth funds based on the spread and combination and use all the selected stocks?
Expert Answer:
Id be happy to help you with these questions Question 1 Options An option is a financial contract that gives the holder the right but not the obligation to buy or sell an underlying asset at a specifi... View the full answer
