Why does a down market put tremendous pressure on a speculator if he or she is the purchaser of a contract in anticipation of a market increase? Relate this answer directly to margin.
Answer to relevant QuestionsWhy is it unrealistic for a portfolio manager to sell a large portion of his portfolio if he thinks the market is about to decline? Using data from Table 16–5 on page 426, assume you purchase a December 1100 (strike price) S&P 500 put option. Compute your total dollar profit or loss if the index has the following values at expiration: a. 1260 b. ...Based on the information in Table 16–1on page 417, assume you buy a Nasdaq 100 December contract at the settle price. You hold the contract for one month and suffer a loss of $3,000. What is settle price after one month? Are betas of individual stocks necessarily stable (constant) over time? What would be the portfolio standard deviation if the two investments in problem 3 had a correlation coefficient (rij) of +0.40?
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