Question: For this problem consider that Forwards and Options have the same expiration date. For each of the questions (a) (d) write down your position's payoff
For this problem consider that Forwards and Options have the same expiration date. For each of the questions (a) (d) write down your position's payoff and profit and demonstrate the profit on a graph. Under "profit" we mean the sum of the payoff and the initial investment made at t=0. a) [12.5] Suppose you bought 2 shares of stock at a price of $35. You also have a Short Forward position on 1 share with an exercise price of $42. b) [12.5] Suppose you bought 2 shares of stock at a price of $35. You also have 2 Long Forward Positions with the exercise price of $42. c) [12.5] Suppose that you hold 2 Call options on stock with an exercise price of $30. Each of them costs $3. You also have a short Forward position with an exercise price of $37. d) [12.5] Suppose you hold 3 Put options on stock with exercise price of $55. Put premium is $7. You also have Shorted 1/2 Share when it was worth $48 and entered a Long Forward position with an exercise price of $58
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
