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Discuss the covered Call strategy and protective Put strategy? And describe their advantages and disadvantages?

Words: 108
Pages: 1
Subject: Finance

Marks: 10 Marks
Assignment Question(s): (Marks 10)

Q1.Explain each of the following concepts as they relate to call options.
Rho ( 1 Mark)
Theta ( 1 Mark)
Vega ( 1 Mark)

Q2.Discuss the covered Call strategy and protective Put strategy? And describe their advantages and disadvantages? (3 Marks)

Q3. Consider a stock worth $35 that can go up or down by 15 percent per period. The risk-free rate is 10 percent. The exercise price of European call option is $35. Use one binomial period.

Determine the two possible stock prices for the next period. (1 Mark)

Determine the intrinsic values/values at expiration of a European call option. (1Mark)

Find the theoretical value/Price of the option today. (2 Mark)