Consider a call price on the S&P 500 bought on March 23 expiring in one month on
Fantastic news! We've Found the answer you've been seeking!
Question:
b) What would your return (in percent) be if you bought the S&P 500 at $2,200 and sold April 23rd at $2,800?
c) On March 23, 2020, the implied VIX was at 61.6%. Using the provided Excel sheet, find the Black-Scholes model price of the option in (a). In Black Scholes formula, use a volatility of σ = 61.6% and take r = 0.50% as the risk-free rate.
d) Suppose that you bought the at-the-money call for the price in (c). What would your return be
when it expired on April 23rd?
e) Suppose now that you bought a call struck at K = $2500 on March 23, 2020. Repeat the previous part to find the your return 1 month later.
Related Book For
Fundamentals Of Investing
ISBN: 9780134083308
13th Edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
Posted Date: