Question

4. You have established the following position:~ Long 100 ABCD 150 Calls~ Long 100 ABCD 150 Puts~ If the price of ABCD is $150 at expiration, what is the resulting ABCD position in the your account on the business day following expiration? Flat or no position in ABCD Long 100,000 shares of ABCD Short 100,000 shares of ABCD Both (b) and (c) 5. Which of the following is the same synthetic position as long stock, long put? O Short put Long call Short call O Long put 6. Which of the following is the same synthetic position as short stock, long call? O Short put Long call Short call O Long put 7. Which of the following is the same synthetic position as long stock, short call? O Short put Long call O Short call O Long put

          4. You have established the following position:~ Long 100 ABCD 150 Calls~ Long
100 ABCD 150 Puts~ If the price of ABCD is $150 at expiration, what is the
resulting ABCD position in the your account on the business day following
expiration?
Flat or no position in ABCD
Long 100,000 shares of ABCD
Short 100,000 shares of ABCD
Both (b) and (c)
5. Which of the following is the same synthetic position as long stock, long put?
O Short put
Long call
Short call
O Long put
6. Which of the following is the same synthetic position as short stock, long call?
O Short put
Long call
Short call
O Long put
7. Which of the following is the same synthetic position as long stock, short call?
O Short put
Long call
O Short call
O Long put

Show more…

4. You have established the following position: Long 100 ABCD 150 Calls Long
100 ABCD 150 Puts If the price of ABCD is 150 at expiration, what is the
resulting ABCD position in the your account on the business day following
expiration?
Flat or no position in ABCD
Long 100,000 shares of ABCD
Short 100,000 shares of ABCD
Both (b) and (c)
5. Which of the following is the same synthetic position as long stock, long put?
O Short put
Long call
Short call
O Long put
6. Which of the following is the same synthetic position as short stock, long call?
O Short put
Long call
Short call
O Long put
7. Which of the following is the same synthetic position as long stock, short call?
O Short put
Long call
O Short call
O Long put

Added by Nicole B.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Supreeta N

08/01/2023

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Step 1: The position consists of being long 100 ABCD 150 calls and long 100 ABCD 150 puts. Show more…

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4. You have established the following position: - Long 100 ABCD 150 Calls - Long 100 ABCD 150 Puts If the price of ABCD is $150 at expiration, what is the resulting ABCD position in your account on the business day following expiration? A. Flat or no position in ABCD B. Long 100,000 shares of ABCD C. Short 100,000 shares of ABCD D. Both B and C 5. Which of the following is the same synthetic position as long stock, long put? A. Short put B. Long call C. Short call D. Long put 6. Which of the following is the same synthetic position as short stock, long call? A. Short put B. Long call C. Short call D. Long put 7. Which of the following is the same synthetic position as long stock, short call? A. Short put B. Long call C. Short call D. Long put

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Transcript

00:01 Hello students, here is a question.

00:01 Consider the case of european ibm call and put options that have an exercise price of $115 and expire in 2 months.

00:09 The ibm, the price of a call is $3 and the price put in $6.

00:15 Assume that ibm is expecting to pay no dividend with next 2 months.

00:19 Suppose also the current price of ibm stock is 109 .30 dollars and bond equivalent year to 2 months.

00:27 T -bill is 6%, non -annualized.

00:31 So, strategy a says that buy ibm stock, buy a put and sell call.

00:35 Strategy b, buy a t -bill with a face value with $115.

00:41 So, cost of a strategy of a and b today we have to find out and also the strategy for a, a profitable attribute strategy is long to buy and the short sell and this year is hold this position until the next year.

00:56 Choose the correct answer.

00:57 So, from this options we have to choose the right answer.

01:00 So, let us start solving this problem.

01:04 Our first step is to calculate information as per the information provided in the question.

01:09 So, those are for strategy a and strategy b.

01:16 So, these are the information provided in the question that is ibm shares, ibm share prices 109 .30, strike price, strike price is $115 and call price.

01:41 So, call price is $3, put price $6, equity period, equity period that is for monthly it is 2 and t -bill yard will be 6%.

02:11 Now, we will calculate for strategy a, cost of strategy...

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