You are given the following data on call and put premiums in pence per share for...
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You are given the following data on call and put premiums in pence per share for Company ABC shares which are currently priced in the market at 510 pence. Each contract refers to 1000 shares. Strike Prices 500 pence 530 pence Call premiums in pence December 65 50 Put premiums in pence December 45 60 i. You expect the share price to rise to 700 pence. Discuss a speculative strategy and the profits/losses at a range of different prices for the underlying share in December. ii. You own 1000 shares in Company ABC and fear that the share price might fall to 300 pence. Discuss a hedging strategy using the above contracts and give the approximate value of your net hedged position at a range of different prices for the underlying share in December. You are given the following data on call and put premiums in pence per share for Company ABC shares which are currently priced in the market at 510 pence. Each contract refers to 1000 shares. Strike Prices 500 pence 530 pence Call premiums in pence December 65 50 Put premiums in pence December 45 60 i. You expect the share price to rise to 700 pence. Discuss a speculative strategy and the profits/losses at a range of different prices for the underlying share in December. ii. You own 1000 shares in Company ABC and fear that the share price might fall to 300 pence. Discuss a hedging strategy using the above contracts and give the approximate value of your net hedged position at a range of different prices for the underlying share in December.
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Answer rating: 100% (QA)
i Speculative Strategy Given that you expect the share price to rise to 700 pence in December you can consider a speculative strategy using call optio... View the full answer
Related Book For
Financial Reporting And Analysis
ISBN: 9781260247848
8th Edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
Posted Date:
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