A European equity option contract has a strike price of $170, an expiration date of 30-Feb-2020, and a delta of -0.596. Which of the following is NOT true about this option contract?Review LaterIf the stock price goes up by a dollar, the option price will fall by 59.6 cents.The holder can only exercise the option on 30-Feb-2020.If the stock price goes up to $175, the holder is better off not exercising the option at expiration.The holder of the option has the right to buy the stock for $170 per share.

When ABC was trading at $52 per share, you paid $6.40 for a call option (for one share) on the stock of ABC with a strike price of $50, and six months until maturity. After six months, the share price of ABC is $54.10.What is the value of the call option at expiration? Do not include the $ sign and answer to the nearest $0.01.

Which of the following is NOT correct about the key elements of options contracts?Group of answer choicesThe premium is the option price that locks the options buyer into the contract.The strike price is the prevailing market price for the underlying security at the option expiration date.The option premium can be different for both European and American-type options.Options contracts include strike price, maturity date and the price of the underlying security.

JustHedge Corporation has the following portfolio of options, all written on the same stockwhich currently sells for £1,025 per share, has a volatility of 25% p.a. and pays no dividends –recall that 1 contract = 100 shares:Option type Position StrikeTime to Expiration(years)Number ofContractsCall Long 1,000 0.5 50Put Long 1,200 0.25 100BE332-6-AU/6i) Using the table below and the fact that delta is given by∆ = 𝑁𝑁 �𝑙𝑙𝑙𝑙( 𝑆𝑆0/𝐾𝐾) + (𝑟𝑟𝑓𝑓 + 𝜎𝜎 2/2)𝑇𝑇𝜎𝜎√𝑇𝑇 �determine the delta of the entire position assuming a continuously compounded risk-free rate of 10% p.a. (show all the details of your calculations and display the resultswith four decimal places)

When ABC was trading at $52 per share, you paid $4.20 for a put option (for one share) on the stock of ABC with a strike price of $50, and six months until maturity. After six months, the share price of ABC is $54.10.What is the value of the put option at expiration? Do not include the $ sign and answer to the nearest $0.01.

Consider a world in which some stock, S, can either go up by 25% or down by 20% in one year and noother outcomes are possible. The continuously compounded risk-free interest, r, is 5.5% and the current priceof the stock, S0, is $100.1. What are the possible stock values in one year’s time, ST ?2. What are the possible payoffs of a European call option written on stock S with a strike price, X, of$100 and time-to-expiration of 1 year, T = 1 ?3. Suppose you want to form a portfolio, P , consisting of short on one call option and long on somenumber, ∆, of the stock, such that the portfolio value in one year’s time, PT , does not depend on thevalue of the stock, ST . What would be the appropriate value of ∆, also called the hedge ratio or delta?4. What would be the (certain) portfolio value in one year’s time, PT ?5. What is the arbitrage-free value of the portfolio today, P0 ?6. What is the premium of the call option today, c0, if there is no arbitrage opportunity?7. Define p = (erT − d) /(u − d), and call this the risk-neutral probability that the stock price increases.What is the value of p ?8. What is the expected value of the stock in one year’s time, E (ST ), under the risk-neutral probabilities?9. At what continuous rate would the stock price have to grow to end up at the expected value?10. What would be the expected value of the call option in one year’s time, E (cT ), under the risk-neutralprobabilities?11. At what continuous rate would the call price have to grow to end up at the expected value?