Assume that the price of Tesla stock is currently $760 a share. Also suppose that the...
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Assume that the price of Tesla stock is currently $760 a share. Also suppose that the excercise price for the Tesla stock options is $760 a share for both puts and calls; the call price is $30 a share and put price is also $30 a share. Both options expire in 3 months. You would like to obtain a profit from your firm view that the price of Tesla stock will move by more than $60 either up or down in the next 3 months. However, you are not sure which way the stock price will move. Assume that both options can only be excercised on expiration date. (a) Assume your view is correct. Describe your position in these options. (7 points) Given your answer in part a answer parts b, c and d about the combined position. (b) What is your total profit or loss per share if the stock price stays at $760 per share at expiration? (6 points) (c.) Suppose the stock price drops to $250 per share at expiration. What is your total profit or loss per share? (6 points) (d) Suppose the stock price increases to $800 per share at expiration. What is your total profit or loss per share? (6 points) Assume that the price of Tesla stock is currently $760 a share. Also suppose that the excercise price for the Tesla stock options is $760 a share for both puts and calls; the call price is $30 a share and put price is also $30 a share. Both options expire in 3 months. You would like to obtain a profit from your firm view that the price of Tesla stock will move by more than $60 either up or down in the next 3 months. However, you are not sure which way the stock price will move. Assume that both options can only be excercised on expiration date. (a) Assume your view is correct. Describe your position in these options. (7 points) Given your answer in part a answer parts b, c and d about the combined position. (b) What is your total profit or loss per share if the stock price stays at $760 per share at expiration? (6 points) (c.) Suppose the stock price drops to $250 per share at expiration. What is your total profit or loss per share? (6 points) (d) Suppose the stock price increases to $800 per share at expiration. What is your total profit or loss per share? (6 points)
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Answer rating: 100% (QA)
a Based on your firm view that the price of Tesla stock will move by more than 60 either up or down in the next 3 months you can construct a straddle ... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-1260153590
12th edition
Authors: Stephen M. Ross, Randolph W Westerfield, Robert R. Dockson, Bradford D Jordan
Posted Date:
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