Question: A trader creates a bear spread by selling a 3 - month put with a $ 5 0 strike price for $ 4 and buying

A trader creates a bear spread by selling a 3-month put with a $50 strike price for $4 and buying a 3-month put with a $55 strike for $8.5.
a. what is the initial investment?
b. what is the total payoff (excluding initial investment) when the stock price in three months is (i) $48,(ii) $53, or (iii) $60?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

10 A trader creates a bear spread by selling asb-month put option with a $25 strike price for $215 and buying a monthputation with a 129 th price for 147 What the Initial investment? What is the...

Q:

A trader creates a bear spread by selling a two-month European put option with a $50 strike price for $10 and buying a two-month European put option with a 56 strike price for $16. What is the ned...

Q:

A trader creates a bear spread by selling a 9-month European Put option with a (X = $35) exercise price for $3.50, and buying a 9-month put option with a (X = $45) exercise price for $8.00 What is...

Q:

A trader creates a bear spread by selling a 9-month European Put option with a (X=$35) exercise price for $3.50, and buying a 9-month put option with a (X=$45) exercise price for $8.00 What is the...

Q:

im still waiting for my answers QUESTION THREE a) A trader creates a bear spread by selling a 6-month put option with a strike price of 50 for 5 and buying a 6-month put option with a 60 strike price...

Q:

A trader creates a bear spread by selling a six-month put option with a $25 strike price for $1.00 and buying a six-month put option with a $29 strike price for $2.50. What is the initial investment...

Q:

A trader creates a bear spread by selling a six-month put option with a $25 strike price for $2.15 and buying a six month put option with $29 strike price for $4.75. The trader has $100,000 to...

Q:

2 Option trading strategies A trader creates a bear spread by selling a six-month put option with a $25 strike price for $2.15 and buying a six month put option with $29 strike price for $4.75. The...

Q:

1. A trader creates a bear spread by selling a six-month put option with a $25 strike price for $2.15 and buying a six-month put option with a $29 strike price for $4.75. What is the initial...

Q:

Derivatives (Comm 4202) Assignment #2 - Due February 27, 2018 1.( 10 marks ).Suppose that the six-month rate is 5% and the nine-month rate is 6% . The rate that can be locked in for the period...

Q:

This is a general term for securities like stocks. bonds, and other assets that represent ownership in a cash flow. investment financial asset real asset financial markets

Q:

The Gallup Organization regularly surveys adult Americans regarding their commute time to work. In addition, they administer a Well-Being Survey. According to the Gallup Organization, The...

Q:

The following gifts are received in 2 0 2 2 by a not - for - profit entity: 1 ) $ 3 , 0 0 0 specified by the donor to be used to pay salaries; 2 ) $ 1 2 , 0 0 0 specified by the donor for new...

Q:

A management position that performs planning and policy setting for the information resources of an entire organization.

Q:

2 What are the potential dangers for organisations of losing their core values and mission? Hewlett Packard (HP) is the worlds leader in sales of personal computers, printers and computer servers,...

Q:

=+When people want to change their behavior, they model the habits and gestures of successful people. They change their carriage and gait when they walk. They stick their chests out with pride. Just...

Q:

=+Part 1 What kind of client could use vernacular in the campaign?