I need some assistance with these assignment. speculative markets, finance Thank you in advance for the help!

I need some assistance with these assignment. speculative markets, finance Thank you in advance for the help! Additionally,the speculator has not to worry of any loss since the American Puts have the opportunities to exercise immediately, therefore will gain access the different values of mispricing at any given time even at its expiration (Shockley 12-45).

A synthetic Long call will be created when the long stock position is to be combined with long put of the same series. Therefore, to get the long synthetic stock position for the we assume that. Maximum profit = unlimited

The total position of the two individuals will be profitable if the stock is less or greater than $45 or. Such a scenario is known as strangle since the individuals hold two profitable positions to make profits under the bear and bull respectively.

The value of a call option is adversely affected with the underlying stock price (in the case $ 390) is expected to drop by a rate equivalent to the value of the dividend on the ex-dividend date. However, as the above case is a call option the owner of the stock receives the cash dividends as of the ex-dividend date, hence the call option can be discounted by a figure as high as the dividend.

Therefore, the Amazon call option priced $ 390 and N (d1 ) denotes the probability or the expected value of receiving the Amazon call option at the expiration of option. Therefore, when S rise to $1000 the N (d1 ) will reduce accordingly indicating that as S grows the chances of exercising the option at the expiry date becomes small due to the increment of market volatility for that stock given as 25%. Under this case the probability if decrement of the amazon may be reflected as the 390/1000= 0.39.

With the stock value dropping to $50, the present value of the contingent adjusted to the risk becomes less than the exercise price of the option during the expiration date, therefore, making the call value to be zero at its expiration date holding that the probabilities are normally distributed.

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