c) Using the information below from the FT answer the following question. SHORT STERLING OPTIONS (Euronext.liffe)...
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c) Using the information below from the FT answer the following question. SHORT STERLING OPTIONS (Euronext.liffe) £500,000 100-rate CALLS............ Strike price Mar 21 i. ii. 94750 94875 95000 - Apr iv. 0.190 0.080 0.020 May 0.195 0.095 0.035 0.005 : Jun 0.205 0.110 0.045 0.015 0.005 .............. PUTS ...….... Apr May 0.005 0.030 0,095 95125 95250 95375 Est. vol. total, Calls 45,800 Puts 28,601 Previous day's open interest, Calls 3,362,136 Puts 773.234. Set up the hedge required at 21st March? 0.015 0.080 0.185 0.310 0.435 Today is the 21st of March. If you are due to invest £50 million in June for three months and you want to achieve a minimum rate on your investment and use the 95125 option. The tick value is £12.50, and the contract value is £500,000. 0.190 0.310 0.435 Jun 0.015 0.045 0.105 0.200 16 0.315 0,435 Draw a graph illustrating this position, highlighting the maximum and minimum rates on your investment and the premium on the option. The graph required is an option payoff chart. iii. Express the value of this option in terms of time value and intrinsic value if the price of the underlying June future contract is 94.94? Illustrate the cashflows on the investment and the option if the interest rate on the expiry of the option is 4.2% with a futures price of 95.8. (10 marks) c) Using the information below from the FT answer the following question. SHORT STERLING OPTIONS (Euronext.liffe) £500,000 100-rate CALLS............ Strike price Mar 21 i. ii. 94750 94875 95000 - Apr iv. 0.190 0.080 0.020 May 0.195 0.095 0.035 0.005 : Jun 0.205 0.110 0.045 0.015 0.005 .............. PUTS ...….... Apr May 0.005 0.030 0,095 95125 95250 95375 Est. vol. total, Calls 45,800 Puts 28,601 Previous day's open interest, Calls 3,362,136 Puts 773.234. Set up the hedge required at 21st March? 0.015 0.080 0.185 0.310 0.435 Today is the 21st of March. If you are due to invest £50 million in June for three months and you want to achieve a minimum rate on your investment and use the 95125 option. The tick value is £12.50, and the contract value is £500,000. 0.190 0.310 0.435 Jun 0.015 0.045 0.105 0.200 16 0.315 0,435 Draw a graph illustrating this position, highlighting the maximum and minimum rates on your investment and the premium on the option. The graph required is an option payoff chart. iii. Express the value of this option in terms of time value and intrinsic value if the price of the underlying June future contract is 94.94? Illustrate the cashflows on the investment and the option if the interest rate on the expiry of the option is 4.2% with a futures price of 95.8. (10 marks)
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i The hedge required at 21st March would be purchasing the June 95125 option to gain the minimum rat... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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