An expert trader informs you that wheat futures will not pass $7.00 during the next 12...

 

Transcribed Image Text:

An expert trader informs you that wheat futures will not pass $7.00 during the next 12 months, and she suggests you buy a $6.40 wheat call option for 10 cents and sell a $6.60 put for 4 cents to compensate the premium you paid buying a call option partly. Calculate the net buying price and total return from hedging with long call and short put under the following scenarios: (For full credit show your work) December wheat futures $6.00 $6.45 $6.50 $6.70 $7.00 Basis ($) -$0.15 -$0.15 +$0.05 +0.15 +0.15 Call option premium ($) $0.02 $0.03 $0.35 $0.50 $0.55 Net purchasing price (S) Total return of hedging with the long call and short put($) An expert trader informs you that wheat futures will not pass $7.00 during the next 12 months, and she suggests you buy a $6.40 wheat call option for 10 cents and sell a $6.60 put for 4 cents to compensate the premium you paid buying a call option partly. Calculate the net buying price and total return from hedging with long call and short put under the following scenarios: (For full credit show your work) December wheat futures $6.00 $6.45 $6.50 $6.70 $7.00 Basis ($) -$0.15 -$0.15 +$0.05 +0.15 +0.15 Call option premium ($) $0.02 $0.03 $0.35 $0.50 $0.55 Net purchasing price (S) Total return of hedging with the long call and short put($)

Answer rating: 100% (QA)

Strategey One long Call One Short Put 1 Call Option Call Premium 002 003 035 ... View the full answer