Question For this question, you are supposed to create a spreadsheet to learn about the money spread using Bullish spread with Puts and, Bearish spread with Puts calls or puts. Create for sheets, one for Bullish spread with calls, Bearish spread with Calls Money Spread A money specad is also known as a vertical er price spread. It refers to a portfolio that contains the same type of option with the same expiration date but different exercise prices. One can form a money spread by using either call options or put options A money specad has two forms, bullish and bearish, depending on the expectation about the stock price movement. If an investor is bullish about the stock and expects the stock price to go higher than the low exercise price but remain lower than the higher cercise price, they will wote a call with the higher exercise price and buy a call with the lower exercise price. On the other hand, if the investor is bearish about the share price and expects the share price to decrease, they will write a call with the lower exercise price and buy a call with the higher exercise price. Since the call option with the lower exercise price will be priced higher than the call option with the higher exercise price, this strategy would provide an immediate cash flow to the investor Money Spread using Calls Assume that the Amazon.com Share price on January 1 is $ 725 and call options and put options are available with maturity in March. Option series A has an exercise price of S740 (Sc), while series Bhas an exercise price of S760 (S) for both calls and puts. The price of a call option with an exercise price of $740 is $35 (C), and the price of a call option with an exercise price of $760 is $20 (O). The put prices are 548 (P) and 560 (P) for optice with exercise prices of S740 and $760, respectively Note: represents the low, and represents the high C and Care the premiums on the calls, and Ps and are the premiums on the puts. Change the stock prices at expiration by S5 from 5600, to SS. Then determine the payoffs on the following strategies. You are supposed to create a spreadsheet to map the payoffs in relation the stock prices at expiration. 1. Bullish speed using Calls in a bullish money spread one will write a call with the higher exercise price and buy a call with the lower exercise price. 2. Bearish spred using Calls. In a bearish money spread.cne would buy a call with the higher exercise price and write a call with the lower exercise price Money Spread using Puts An investor can create money spreads using put options. A bullish specad means that the investor expects the stock price to increase. When the stock price is expected to increase it makes sense to buy a put with the lower exercise price and write a pet with the higher exercise price. This will result in immediate cash inflow, because a put with a higher ptice will have a higher value. On the other hand, if the investor is bearish on the stock and expects the stock price to decrcase, they would buy a put with a higher exercise price and write a put with a lower exercise price Change the stock prices at expiration by SS from 600.30 S80. Then determine the payoffs on the following strategies. You are supposed to create a spreadsheet to map the payoffs in relation the stock prices af expiration 1. Bullish spread using Puts. In a bullish money spreadere will buy a put with the lower exercise price and write a put with the higher exercise price 2. Bearish spread using Purs. In a bearish money spread, one would buy a put with a higher exercise price and write a put with a lower exercise price Question 2 For this part, choose two stocks from the data you downloaded in Part I. Choose daily data for one year (for example: from October 30, 2019 until October 30, 2020, or for year 2021). Then work with the adjusted closing prices. Read your data into Excel in order to create some options strategies. For each stock, find the average price over the sample period and consider that as the Exercise price. Then generate stock prices above the mean and below the mean by $1 (say 20 prices above and 20 prices below). Then, suppose you have a call written on those stocks with a premium of 1% of the average price and 0.5% a premium for a put option. You are asked to: 1- Create a call strategy on one of the stocks and map the profit/loss payoff (to both the long and short). 2- Create a put strategy on one of the stocks and map the profit/loss payoff (to both the long and short). 3. Create a straddle strategy on one of the stocks and map the profit/loss (to both the long and short). Can you think about how to create a strangle strategy if you consider the put exercise price only one dollar less than the average (think here about the exercise price)? 4. Would you be able to replicate a forward contract (long or short) using the call and option contracts. Check the notes on how you can do that. Question For this question, you are supposed to create a spreadsheet to learn about the money spread using Bullish spread with Puts and, Bearish spread with Puts calls or puts. Create for sheets, one for Bullish spread with calls, Bearish spread with Calls Money Spread A money specad is also known as a vertical er price spread. It refers to a portfolio that contains the same type of option with the same expiration date but different exercise prices. One can form a money spread by using either call options or put options A money specad has two forms, bullish and bearish, depending on the expectation about the stock price movement. If an investor is bullish about the stock and expects the stock price to go higher than the low exercise price but remain lower than the higher cercise price, they will wote a call with the higher exercise price and buy a call with the lower exercise price. On the other hand, if the investor is bearish about the share price and expects the share price to decrease, they will write a call with the lower exercise price and buy a call with the higher exercise price. Since the call option with the lower exercise price will be priced higher than the call option with the higher exercise price, this strategy would provide an immediate cash flow to the investor Money Spread using Calls Assume that the Amazon.com Share price on January 1 is $ 725 and call options and put options are available with maturity in March. Option series A has an exercise price of S740 (Sc), while series Bhas an exercise price of S760 (S) for both calls and puts. The price of a call option with an exercise price of $740 is $35 (C), and the price of a call option with an exercise price of $760 is $20 (O). The put prices are 548 (P) and 560 (P) for optice with exercise prices of S740 and $760, respectively Note: represents the low, and represents the high C and Care the premiums on the calls, and Ps and are the premiums on the puts. Change the stock prices at expiration by S5 from 5600, to SS. Then determine the payoffs on the following strategies. You are supposed to create a spreadsheet to map the payoffs in relation the stock prices at expiration. 1. Bullish speed using Calls in a bullish money spread one will write a call with the higher exercise price and buy a call with the lower exercise price. 2. Bearish spred using Calls. In a bearish money spread.cne would buy a call with the higher exercise price and write a call with the lower exercise price Money Spread using Puts An investor can create money spreads using put options. A bullish specad means that the investor expects the stock price to increase. When the stock price is expected to increase it makes sense to buy a put with the lower exercise price and write a pet with the higher exercise price. This will result in immediate cash inflow, because a put with a higher ptice will have a higher value. On the other hand, if the investor is bearish on the stock and expects the stock price to decrcase, they would buy a put with a higher exercise price and write a put with a lower exercise price Change the stock prices at expiration by SS from 600.30 S80. Then determine the payoffs on the following strategies. You are supposed to create a spreadsheet to map the payoffs in relation the stock prices af expiration 1. Bullish spread using Puts. In a bullish money spreadere will buy a put with the lower exercise price and write a put with the higher exercise price 2. Bearish spread using Purs. In a bearish money spread, one would buy a put with a higher exercise price and write a put with a lower exercise price Question 2 For this part, choose two stocks from the data you downloaded in Part I. Choose daily data for one year (for example: from October 30, 2019 until October 30, 2020, or for year 2021). Then work with the adjusted closing prices. Read your data into Excel in order to create some options strategies. For each stock, find the average price over the sample period and consider that as the Exercise price. Then generate stock prices above the mean and below the mean by $1 (say 20 prices above and 20 prices below). Then, suppose you have a call written on those stocks with a premium of 1% of the average price and 0.5% a premium for a put option. You are asked to: 1- Create a call strategy on one of the stocks and map the profit/loss payoff (to both the long and short). 2- Create a put strategy on one of the stocks and map the profit/loss payoff (to both the long and short). 3. Create a straddle strategy on one of the stocks and map the profit/loss (to both the long and short). Can you think about how to create a strangle strategy if you consider the put exercise price only one dollar less than the average (think here about the exercise price)? 4. Would you be able to replicate a forward contract (long or short) using the call and option contracts. Check the notes on how you can do that