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Question#1: An at-the-money European call on a fu...




Question#1: An at-the-money European call on a futures sells for $5.50. What is the price of the at-the-money European put on the futures? Assume both the call and put have the same maturity. Question#2? An investor wishes to enter into a delta-neutral position with two options that, given the current price of the underlying asset, have the following prices and deltas: Option Price Delta A 14 -0.4300 B 14 +0.3300 Suppose an investor writes eight contracts of option A. To be delta neutral, how many contracts of option B should be traded? Should they be bought or sold? Question#3: Suppose that the current level of the S&P 500 index is 900, and the annual dividend yield on the index is 1.5%. The Treasury bills yield 5% per annum. Both rates are continuously compounded. What is the theoretical price of an S&P 500 futures contract with delivery in two months? Question#4: Suppose you are expecting the BCE stock to move substantially over the next three months. You are considering a butterfly spread. The current price of BCE stock is $40 per share. The three-month European call options on BCE stock, with strike prices of $30, $40 and $50, cost $7, $3 , and $2, respectively. Construct an appropriate butterfly spread.


Paper#2687 | Written in 18-Jul-2015

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