derivatives

Jio 5:22 PM 2 94% Done Tutorial 11 - Derivatives.docx (a) Problem 5 Dexus Property Group shares currently trade at $1.10. An investor enters into a call option on Dexus Group shares with an exercise price of $1.30 per share in two months, and a premium of $0.05 per share. Define an option and explain the premium and the exercise price. (b) What is a call option? (c) Draw a fully labelled diagram of the call option showing the profit and loss profile of the option buyer and the writer of the option (including the break-even price) (d) At what minimum stock price will the option buyer exercise the option on the expiration date? Problem 6 A superannuation fund is holding a large number of National Bank Limited shares in an investment portfolio and wishes to protect the value of the investment. The National Bank Limited shares currently trade at $34.49. The superannuation fund buys a put option with an exercise price of $34.00 per share and a premium of $0.95 per share (a) What is a put option? (b) By entering into this option strategy, explain whether the superannuation fund will exercise the option if the spot price is above or below the exercise price. (c) Draw a fully labelled diagram of the put option showing the profit and loss profile of the option buyer and the writer of the option (including the break-even price)