Homework: Financial Derivatives
Learning Outcomes:
1. Describe trading strategy which incorporates the use of call and put options
2. Calculate option maximum gain, maximum loss, and breakeven on various options positions
Task
I. Explain each of the following concepts as they relate to call options.
1. Delta
2. Gamma
3. Rho
II. What are the differences among scalpers, day traders, and position traders?
III. Assume the possible stock prices of Hull Inc. are $150, $155, $160, $165, $170, $175, and $180. Theprice (premium) is $5 for October165 put option of Hull Inc.
Suppose you buy one October 165 put option contract(Np=100)of Hull Inc. and hold it until the options expire.
1. Determine the profit and loss at respectivestock prices of Hull Inc.
2. Determine the breakeven stock price at expiration.
3. What are the maximum possible profit and loss on this transaction.
Format your homework according to the give formatting requirements:
1. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the homework, the course title, the student's name, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.