Napoleon has been studying the Netflix company stock and has come to the conclusion that Netflix...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Napoleon has been studying the Netflix company stock and has come to the conclusion that Netflix is currently overpriced. Napoleon would like to capitalize off of this potentially mispriced stock with options. Being risk averse, he has decided to execute a "bear spread with puts" rather than a more expensive strategy such as a simple "long put". Netflix is currently priced at $287.50. The most liquid puts currently available on Netflix are the following: 9 C Put X $280.00 $295.00 Put Premium $8.00 $17.00 a. Graph the expiration-day profit diagram for this strategy in Excel with stock prices ranging from $250 to 325? (30 points) b. What would be the break-even stock price for this bear spread strategy (i.e., at what stock price range is the strategy profitable)? (20 points) Napoleon has been studying the Netflix company stock and has come to the conclusion that Netflix is currently overpriced. Napoleon would like to capitalize off of this potentially mispriced stock with options. Being risk averse, he has decided to execute a "bear spread with puts" rather than a more expensive strategy such as a simple "long put". Netflix is currently priced at $287.50. The most liquid puts currently available on Netflix are the following: 9 C Put X $280.00 $295.00 Put Premium $8.00 $17.00 a. Graph the expiration-day profit diagram for this strategy in Excel with stock prices ranging from $250 to 325? (30 points) b. What would be the break-even stock price for this bear spread strategy (i.e., at what stock price range is the strategy profitable)? (20 points)
Expert Answer:
Related Book For
Managerial Accounting An Integrative Approach
ISBN: 9780999500491
2nd Edition
Authors: C J Mcnair Connoly, Kenneth Merchant
Posted Date:
Students also viewed these accounting questions
-
A leader in your firm has been studying the foreign exchange market for a number of years and believes that she can predict several of the foreign currency exchange rates relative to the U.S. dollar....
-
A management behavior analyst has been studying the relationship between male/female supervisory structures in the workplace and the level of employees job satisfaction. The results of a recent...
-
A civil engineer has been studying the frequency of vehicle accidents on a certain stretch of interstate highway. Long-term history indicates that there has been an average of 1.72 accidents per day...
-
Design a plan to research and select a new or used automobile.
-
Describe the three requirements for a valid offer.
-
What is the difference between an 18 gauge needle and a 24 gauge needle?
-
A bar magnet is enclosed by a spherical surface. (a) What is the magnetic flux through the entire surface? (b) If the magnetic flux through the hemisphere closest to the magnet's north pole is...
-
On January 4, 2015, an FI has the following balance sheet (rates = 8 percent) DGAP = [8 (396/450)4] = 4.48 years > 0 The FI manager thinks rates will increase by 0.55 percent in the next three...
-
31 (i) Explain why the refractive index of any material with respect to air is always greater 1. (ii) In the figure below a light ray travels from air into the semi-circular plastic block. Give a...
-
Ariana and Nicholas Peterson are about to construct their income and expense statement for the year ending December 31, 2020. They have put together the following income and expense information for...
-
Assuming that the Op-amp in the circuit shown is ideal, V, is given by R vo WW 3 2R 772 N ww V0 3R ww V R 5 (b) 2V-2V/ + (d) [2014: 2 Marks, Set-3]
-
Qualitatively, how uniform is the gravitational field inside the room in which you are sitting?
-
Particles A and B, each carrying a charge of \(2.0 \mathrm{nC}\), are at the base corners of an equilateral triangle \(2.0 \mathrm{~m}\) on a side. (a) What is the potential (relative to zero at...
-
An electron initially placed \(0.10 \mathrm{~m}\) to the right of a small charged sphere moves to the right with an inirial acceleration of \(4.0 \times 10^{7} \mathrm{~m} / \mathrm{s}^{2}\). What is...
-
Six particles, each carrying a charge of \(3.0 \mathrm{nC}\), are equally spaced along the equator of a sphere that has a radius of \(0.60 \mathrm{~m}\) and has its center at the origin of a...
-
A particle carrying charge \(+q\) is located on the \(x\) axis at \(x=+d\). A particle carrying charge \(-3 q\) is located on the \(x\) axis at \(x=-7 d\). (a) With zero potential at infinity, at...
-
Find the effective rate (APY) for the year given principal = $8,000, interest rate = 6%, and compounded quarterly. Round to the nearest hundredth. Show me how to do it mathematically and not with a...
-
Name some of the various types of financial intermediaries described in the chapter and indicate the primary reason(s) each was created.
-
Now that Bill has gotten another class under his belt, he wants to understand the relative impact, in percentage terms, of the changes in his business. So using the data from Problem 1 above:...
-
Please list the various types of continuous improvement-based action controls and provide a brief description of them.
-
Grill masters makes a variety of gas and charcoal grills for customers across the United States. While the grills vary in a number of ways, the primary differences are features (special functions)...
-
Principles for Responsible Management Education (PRME) is a not-for-profit entity. It engages business schools to ensure they provide future leaders with the skills needed to balance economic and...
-
You are setting up a chatbot agency to service marketing, sales and customer services teams. Discuss the advantages and disadvantages of setting up the business as a sole trader or company and the...
-
Entities are expected to perform in environmental, governance and social areas as well as profit (unless a not-for-profit entity). List some key performance indicators applicable to each sphere.
Study smarter with the SolutionInn App