Question: Explain how to create a bear spread from put options with strike prices of $55 and $60. Calculate the cost to set up the bear

Explain how to create a bear spread from put options with strike prices of $55 and $60. Calculate the cost to set up the bear spread strategy if the put premiums are $2.75 and $5.35. The dollar cost should be a total cost, not per share cost.

What is the break-even point on this trade if the spread is held until maturity? Calculate the profit/loss from the strategy when the stock trades at $55; $58; $64 at expiration. What is the main advantage of trading bear spreads with puts as opposed to buying puts?

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!

Data Auditing As a member of the audit team examining MPLs payroll expense, you have gathered a list of current employees names and salary amounts. Prepare a descriptive analysis of payroll expense...

10. Use the options prices for Spotify in the EXCEL FILE to create a bear spread using the puts with strike prices 170 and 175. Be sure to use the appropriate bid and ask prices. a. What will be your...

Use the option prices in the Excel File to create a bear spread using the puts with strike prices $\$ 170.00$ and $\$ 175.00$. Be sure to use the appropriate bid and ask prices. When you set up...

Question 7 1 pts Three month European put options with strike prices of $35 and $40 cost $4 and $6, respectively. You bought a bear spread using those two put options. b. What is the maximum loss per...

The price of soybeans is currently $11.71 per bushel. Three-month put options with strike prices of $11.60 and $11.80 cost $0.18 and $0.26, respectively. In tabular form, this would be expressed as...

The price of a stock is currently $29. Three-month put options with strike prices of $30 and $35 cost $6 and $10, respectively. In tabular form, this would be expressed as Strike Cost (Premium) $30...

The price of a stock is currently $25. Three-month put options with strike prices of $30 and $35 cost $6 and $9, respectively. In tabular form, this would be expressed as Strike Cost (Premium) $30 $6...

Three month European put options with strike prices of $35 and $40 cost $4 and $6, respectively. You bought a bear spread using those two put options. c. What is the breakeven stock price from the...

If a six month put options with strike prices of $60 and $45 cost $4 and $2.5 respectively. How can a trader create a bear spread and what will the profit/loss be if the stock at expiration was $55?

Three month European put options with strike prices of $35 and $40 cost $4 and $6, respectively. You bought a bear spread using those two put options. a. What is the maximum gain per share from the...

Three month European put options with strike prices of $35 and $40 cost $4 and $6, respectively. You bought a bear spread using those two put options. a. What is the maximum loss per share from the...

-x, y Solve V2u(x, y) = 0 en R = 0 the temperature at point (x, y). The border values are: x5,0 y 5} where u(x,y) denotes u(x,0) = 20, u(x,5) = 180 for 0

Two bars AD and DG are connected by a pin at D and by a spring AG. Knowing that the spring is 300 mm long when un-stretched and that the constant of the spring is 5 kN/m, determine the value of x...

If an active manager believes the U . S . dollar is overvalued compared to the Japanese currency, then he should increase his exposure to Multiple choice question. renminbi. yen. dollars.

Draw a class diagram and its relationship based on the following statements. You can use any UML tool/software to represent your class diagram. Do NOT copy and paste your diagram, use the attachment...