- What position in naked options would a firm adopt if they believe that the price of the stock is going to drop and the volatility of the stock is going to decrease?
- Microsoft is currently trading at $26. A firm expect that prices will increase but not rise above $28 per share. Options on Microsoft with strikes of $22.50, $25.00, $27.50, and $30 are available. What options portfolio would they construct from these options to incorporate their views?
- Assume the current volatility of oil is high. What options portfolio offers a firm a gain from the high volatility if they do not have a view on direction?
- A firm is planning to trade on the fortunes of a biotech firm that has a drug patent pending FDA approval. If the patent is approved, the stock price is expected to go up sharply. If it is not approved, the stock will drop sharply. In the firm’s view, it is unlikely to move more than 20% in either direction. Describe a portfolio combining straddles and strangles that takes advantage of that view. Suppose (for example) that the stock price of the firm is currently at 100.
- A. A firm is long futures and long a straddle, what is their view on direction? On volatility?
B. (8.26) If a firm is short futures and long a straddle, what is their view on direction? On volatility?
- How does the payment of an unexpected dividend affect (a) call prices and (b) put prices?
ly intolerant of heretics and of those who did not share their faith, due to the fact that Spain was ruled by the Catholic monarchs, Isabella and Ferdinand. However, despite this, few countries in Europe could be considered as religiously accepting in this period as it was a universal goal to achieve religious uniformity. Due to this fact it would be naive to believe that the Inquisition was set up purely on the basis of religious intolerance and therefore there must be an underlying purpose of the Inquisition which was simply not as documented as the heresy led beliefs were. This is supported by the fact that when inquisitors began operations in locality they would have all of the locals be present for when they read out an edict which comprised a list of offences committed. Despite heresy being a recurring offence which would be read out, other moral offences were disclosed such as blasphemy, bigamy, sodomy and ‘solicitation’ (sexual advances made by a priest during confession), which were also known as minor heresies, this means that religious heresy was not the only target of the inquisition, as acts which were believed to be immoral were also targeted. This suggests that the Inquisitions initial purpose was to root out religious heresy and also highlights the fact that the Inquisitors targeted heresies in all forms, minor and major, in order to cleanse a fragmented Spain of deviant behaviour, which was the early modern notion of the role of the church. Despite both Isabella and Ferdinand being coined the ‘catholic monarchs’ Isabella can be seen as the one who was arguably more catholic and therefore pushed the inquisition for more religious reasons. Therefore in the case of Ferdinand, he was less religiously led and focused on foreign policy and the economy. A key event which was led by Ferdinand himself, in a strive for power, is the Conquest of Granada (1482-92). The conquest of Granada saw an end to the Reconquista, which was a vital aspect to Medieval Spain. This saw the establishment of a Spanish army that was to fight effectively in the Italian Wars. This was considered as a demonstration against Islam, as supported by the fact that Isabella used religious imagery deliberately to ensure support for the war. However, despite the war being pivotal to foreign policy at the time, it placed a major financial strain on Castile and Aragon. The total cost of the war is estimated at 800 million maravedis. This highlights the fact that the Inquisitions sole purpose is hard to distinguish as religion and economic r>GET ANSWER