Solved: How high does stock price have to rise for option strategy, Microeconomics

+44 141 628 6080
[email protected]

How high does stock price have to rise for option strategy

Question:

The current price of a stock is $94, and three-month European call options with a strike price of $95 currently sell for $4.70. An investor who feels that the price of the stock will increase is trying to decide between buying 100 shares and buying 2,000 call options (20 contracts). Both strategies involve an investment of $9,400. How high does the stock price have to rise for the option strategy to be more profitable?

View Complete Question

Solution Preview :

Prepared by a verified Expert

Microeconomics: How high does stock price have to rise for option strategy

Reference No:- TGS02094171

Now Priced at $20 (50% Discount)

Recommended (99%)

Rated (4.3/5)

Have a Question? (oR Write a Review)

Write atleast 100 words!!

Recent Questions Asked Microeconomics

Q : Discuss industry-base consumer for prescription drug product

Identify individual and industry-based consumers for the prescription drug product in the scenario. Consider buying behaviors and characteristics of these consu

Q : Private property and protection of property rights

Question: Why is private property, and the protection of property rights, so crucial to the success of the market system?

Q : Bergholts to rent or to purchase the home

Estimate whether it is financially more attractive for the Bergholts to rent or to purchase the home over a five-year holding period.

Q : Problem related to forward contracts

The price of gold is currently $700 per ounce. Forward contracts are available to buy or sell gold at $900 for delivery in one year.

Q : How high does stock price have to rise for option strategy

How high does the stock price have to rise for the option strategy to be more profitable?

Q : Provide a response summarizing your findings

Provide a response summarizing your findings related to your state of residence. ( NOTE; MY STATE OF RESIDENCE IS BALTIMORE MARYLAND).

Q : What position should the fund manager take to hedge

What position should the fund manager take to hedge exposure to the market over the next two months?

Q : Discuss about the leadership scholars

In what ways are the two sources suggestive of similar theoretical concepts and/or presentation?

Q : Determine the market equilibrium price

A. Algebraically determine the market equilibrium price/output combination. B. Use a graph to confirm your answer.

1945947

Questions
Asked

3,689

Active Tutors

1450356

Questions
Answered

Start Excelling in your courses, Ask a tutor for help and get answers for your problems !!

ask Question

Asked Questions

Cases of local communities using modern technology

Question: Cases of local communities using modern technology to preserve and revive their traditions:

Discussion about idea of the tramp stamp

Jane is doing a study about tattoos. She is interested in studying the idea of the "tramp stamp" (a tattoo in the small of a woman's back).

Review the real-life cat and mouse chase

Real-Life Cat and Mouse Chase: Understanding the Perceptions and Attitudes of Street Vendors of Metro Manila towards MMDA Regulation No. 03-004

Statement about political systems controlled by men

Multiple Choice Question Identify a true statement about political systems controlled by men. Multiple choice question.

Compare critical feminist theory and power-control theory

Compose a paper that compares and contrasts critical feminist theory and power-control theory as forms of gendered criminology. Your paper should:

How are schools important in the struggle for power

Question: How are schools important in the struggle for power and status?

How does the pyramid change

Staying with Nigeria, rewind the year to 1950. Using the +5 year control, fast forward in 5 year increments until you reach 2020.