Homework: Financial Derivatives
Learning Outcomes:
o Describe trading strategy which incorporates the use of call and put options
o Calculate option maximum gain, maximum loss, and breakeven on various options positions
Task
• Explain each of the following concepts as they relate to call options.
o Delta
o Gamma
o Rho
• What are the differences among scalpers, day traders, and position traders?
• 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.
o Determine the profit and loss at respectivestock prices of Hull Inc.
o Determine the breakeven stock price at expiration.
o What are the maximum possible profit and loss on this transaction.
Format your homework according to the following formatting requirements:
o The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
o The response also includes a cover page containing the title of the homework, the student's name, the course title, and the date. The cover page is not included in the required page length.
o Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.