Assignment 1
Data-Driven Finance II
Rice University
A stock is trading at $147, and options are trading at the following prices. Assume the options all have the same maturity and bid = ask = price.
Strike | Call | Put |
---|---|---|
120 | 31.55 | 1.96 |
125 | 27.10 | 2.76 |
130 | 24.40 | 3.57 |
135 | 18.10 | 4.75 |
140 | 14.93 | 6.25 |
145 | 11.60 | 8.25 |
150 | 8.89 | 10.42 |
155 | 6.50 | 13.25 |
160 | 4.70 | 16.60 |
165 | 3.25 | 20.25 |
- Suppose you own the stock and want to collar it. Propose a costless (or, rather, near costless) collar. Plot the value of your collared stock, net of any income/expense for the collar, as a function of the stock price at the options maturity.
- Suppose you don’t own the stock but want to make a bet on it. Propose a bull spread. Plot your profit or loss on the spread as a function of the stock price if you hold it to maturity. The profit or loss should be as a percent of the cost of the spread.
- Assume you want to bet against the stock and repeat #2 for a bear spread.
- Repeat #2 for a straddle. What are you betting on with a straddle?
- Repeat #2 for a butterfly spread. What are you betting on with a butterfly spread?
- Consider the 140 call and put. What is the “PV of strike” that is consistent with put-call parity?