You just heard on CNN that war in the Gulf could break out any moment. The...
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You just heard on CNN that war in the Gulf could break out any moment. The thinking on Wall Street appears to be that while a short and quick war that ends within a month would be bullish for US stocks, while a long dragged out one could be hugely detrimental. As a savvy investor of options, you are thinking of an appropriate strategy. The website of your US broker contains the following quotes: Dow Jones Index Average = 7960 points S&P 500 = 950 points ⚫90-day US T-Bill rate = 5.6% ⚫90-day S&P 500, 950 call @ 14 points 90-day S&P 500, 950 put @ 10 points Spot month S&P 500 @ 3 points (expiring next week) Outline and graph the best strategy, carefully label the graph, and show the payoff. Explain why your strategy is the best. You just heard on CNN that war in the Gulf could break out any moment. The thinking on Wall Street appears to be that while a short and quick war that ends within a month would be bullish for US stocks, while a long dragged out one could be hugely detrimental. As a savvy investor of options, you are thinking of an appropriate strategy. The website of your US broker contains the following quotes: Dow Jones Index Average = 7960 points S&P 500 = 950 points ⚫90-day US T-Bill rate = 5.6% ⚫90-day S&P 500, 950 call @ 14 points 90-day S&P 500, 950 put @ 10 points Spot month S&P 500 @ 3 points (expiring next week) Outline and graph the best strategy, carefully label the graph, and show the payoff. Explain why your strategy is the best.
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Here are the details of the question The Dow Jones Industrial Average is currently at 7960 The SP 500 is currently at 950 A 90day call option on the SP 500 with a strike price of 950 costs 14 points A ... View the full answer
Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
Posted Date:
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