Discussion Post: Financial Derivatives
Assume the possible stock prices of Hull Inc. are $150, $155, $160, $165, $170, $175, and $180. The price(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.
• Determine the profit and loss at respective stock prices of Hull Inc.
• Determine the breakeven stock price at expiration.
• What are the maximum possible profit and loss on this transaction.
Suppose there is a commodity in which the expected future spot price is $60.Toinduce investors to buy futures contracts, a risk premium of $4 is required. Tostore the commodity for the life of the futures contract would cost $5.50. Find the future s price?
The response should include a reference list. One-inch margins, Using Times New Roman 12 pnt font, double-space and APA style of writing and citations.