Question: please type the answer by computer, so i can see it clearly, thank you!!! You want to trade stock options using HSBC as the underlying

please type the answer by computer, so i can see it clearly, thank you!!!

You want to trade stock options using HSBC as the underlying asset, so you go to a reputed worldwide bank's website. The following information is available concerning the option premium:

please type the answer by computer, so i can see it clearly,

Question:

1(a) You believe that HSBC stock price will go up in coming 3 months because global central banks will ease their monetary policies and you decide to buy the option with strike $50. What option you will buy? Explain.

1(b) Draw the profit diagram at expiration for option you have bought in 1(a).

1(c) At expiration, HSBC stock price goes up to $60, what will you do? Explain. (2 marks) Calculate the profits you can make if you act according to 1(b).

Ask Call option Expiration August 2022 August 2022 Strike Bid 50 1.50 1.80 52 1.40 1.60 Strike Bid Ask Put option Expiration August 2022 August 2022 50 0.85 1.15 52 0.90 1.20 Ask Call option Expiration August 2022 August 2022 Strike Bid 50 1.50 1.80 52 1.40 1.60 Strike Bid Ask Put option Expiration August 2022 August 2022 50 0.85 1.15 52 0.90 1.20

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!