You are an options trader for a hedge fund. Your assistant prepared the following sheet containing...
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You are an options trader for a hedge fund. Your assistant prepared the following sheet containing the prices of various American options on Jan 2. Assume the options expire at the end of the expiration month. Assume a transaction cost of 2%. Stock ABC put ABC call ABC put DEF call Stock Std. Exercise Price Dev. Price 100 10% 100 100 10% 100 100 10% 110 Expiration Months March June September 4.00 4.05 4.70 N.A. 9.50 15.30 14.20 3.20 5.60 100 30% 100 Note: N.A. means not available. (1) Appraise the options and identify three (3) pricing discrepancies, based only on the information given in the question. Show how you would profit from them. 5.20 5.70 Use the following format to answer this question. Pricing Discrepancy X (X=1, 2, or 3) Pricing Discrepancy Discussion: Strategy to profit from pricing discrepancy: 6.20 You are an options trader for a hedge fund. Your assistant prepared the following sheet containing the prices of various American options on Jan 2. Assume the options expire at the end of the expiration month. Assume a transaction cost of 2%. Stock ABC put ABC call ABC put DEF call Stock Std. Exercise Price Dev. Price 100 10% 100 100 10% 100 100 10% 110 Expiration Months March June September 4.00 4.05 4.70 N.A. 9.50 15.30 14.20 3.20 5.60 100 30% 100 Note: N.A. means not available. (1) Appraise the options and identify three (3) pricing discrepancies, based only on the information given in the question. Show how you would profit from them. 5.20 5.70 Use the following format to answer this question. Pricing Discrepancy X (X=1, 2, or 3) Pricing Discrepancy Discussion: Strategy to profit from pricing discrepancy: 6.20
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Pricing Discrepancy 1 Pricing Discrepancy Discussion There seems to be a pricing inconsistency between the DEF call options with the same exercise pri... View the full answer
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