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The following table shows option quotes for the November soybean contract. Please create a bear spread. What...

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Finance

  1. The following table shows option quotes for the November soybeancontract.

    1. Please create a bear spread. What positions in what contractswould you take?

    2. What is the cost of your position? (Remember, there are at leasttwo correct

      combinations of strikes that you could use in this problem

    3. Calls

      Strike

      Puts

      52.5

      910

      31.25

      47.5

      920

      35.25

      43.75

      930

      43.75

      38.25

      940

      45.75

      34.5

      950

      51.75

    4. Now with the same option quotes, create a long straddleposition. At the money is 930.

      1. What positions in what contracts would you take?

      2. What is the cost of your position?

Answer & Explanation Solved by verified expert
4.5 Ratings (752 Votes)

BEAR SPREAD WITH PUTS
Strategy:1 Premium
Buy Put Option at Strike Price 930 -43.75
Sell Put Option at strike Price 920 35.25
Net Premium -8.5
Strategy 2 Premium
Buy Put Option at Strike Price 930 -43.75
Sell Put Option at strike Price 910 31.25
Net Premium -12.5
Bear Spread is used when the trader expects share price willmove downwards
Cost of position of Bear Spread Strategy1 8.5
Cost of position of Bear Spread Strategy2 12.5
LONG STRADDLE STRATEGY Premium
BUY Call option at strike price 930 -43.75
BUY Put option at strike price 930 -43.75
Net Premium -87.5
Long Straddle is used when the trader expects high volatility in share price .
Cost of position Long Straddle 87.5

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Transcribed Image Text

The following table shows option quotes for the November soybeancontract.Please create a bear spread. What positions in what contractswould you take?What is the cost of your position? (Remember, there are at leasttwo correctcombinations of strikes that you could use in this problemCallsStrikePuts52.591031.2547.592035.2543.7593043.7538.2594045.7534.595051.75Now with the same option quotes, create a long straddleposition. At the money is 930.What positions in what contracts would you take?What is the cost of your position?

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