The common stock of the P.U.T.

The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next three months. You do not know whether it will go up or down, however. The current price of the stock is $100 per share, the price of a three-month call option with an exercise price of $100 is $10, and a put with the same expiration date and exercise price costs $7.

a. What would be a simple options strategy to exploit your conviction about the stock price’s future movements?

b. How far would the price have to move in either direction for you to make a profi t on your initial investment?

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The common stock of the P.U.T.

The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next three months. You do not know whether it will go up or down, however. The current price of the stock is $110 per share, the price of a three-month call option with an exercise price of $110 is $9, and a put with the same expiration date and exercise price costs $7.

A)

What would be a simple options strategy to exploit your conviction about the stock price’s future movements?

Group of answer choices

Buy a put option and sell a call option on the stock.

Sell both a put option and a call option on the stock.

Sell a put option and buy a call option on the stock.

Buy both a put option and a call option on the stock.

B) Suppose that you use the options strategy in the previous question. How far would the price have to move up above for you to make a profit on your initial investment?

C) Suppose that you use the options strategy in the previous question. How far would the price have to move down below for you to make a profit on your initial investment?

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.The common stock of the P.U.T

.The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next 3 months. You do not know whether it will go up or down, however. The current price of the stock is $120 per share, and the price of a 3-month call option at an exercise price of $120 is $5.20.

a. If the risk-free interest rate is 7% per year, what must be the price of a 3-month put option on P.U.T.T. stock at an exercise price of $120? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Put-call parity $ 3.19
b. What would be a simple options strategy to exploit your conviction about the stock price’s future movements. How far would it have to move in either direction for you to make a profit on your initial investment? (Round your intermediate calculations and final answer to 2 decimal places.)
Strategy
Price change for profit

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