1) You observe the following data for XYZ stock and Call options on the stock in the market:

Current stock price of XYZ: $340.00
Dec 16th Call option, strike price $320, contract size 100 shares: $23.90
Dec 16th Call option, strike price $340, contract size 100 shares: $10.40
Dec 16th Call option, strike price $360, contract size 100 shares: $ 2.63

Produce an analysis in Excel which analyzes the following comparisons:

a) the Dollar profit/loss from buying 100 shares of XYZ stock versus the Dollar profit/loss from buying 1 Call option. Consider all three different Call options in the analysis and assume that we are conducting the analysis for the expiry date of Dec 16th. Consider the following scenarios for the price of XYZ stock on that date:
$300, $310, $320, $330, $340, $350, $360, $370, $380, $390, $400

b) Repeat the comparison from part (a), but this time for the holding period return on investment.

c) the Dollar profit/loss from buying 100 shares of XYZ stock versus the Dollar profit/loss from investing the same Dollar amount, i.e. $34,000, in each Call option on the stock. Round off to the nearest whole number of option contracts if you cannot invest exactly $34,000. Consider all three different Call options in the analysis and assume that we are conducting the analysis for the expiry date of Dec 16th. Consider the following scenarios for the price of XYZ stock on that date:
$300, $310, $320, $330, $340, $350, $360, $370, $380, $390, $400

2) Suppose you are a US investor who has investments in England and expects to receive income related to these investments (dividends or bond coupons, for example) in the amount of £25,000 at the end of December. The current US $-British £ exchange rate is $1.50/£, but you are concerned about what the value of this income will be in US$ when you receive it and convert it in the future. Produce an analysis in Excel which examines the following strategies designed to address receiving this money:
-not hedging the receipt of £25,000 at all

-buying a Put option. Consider the following contracts:
-strike price of $1.50, premium of $3 per contract, contract size of £10,000, expiry end of December
-strike price of $1.40, premium of $0.50 per contract, contract size of £10,000, expiry end of December

-entering into a short forward position where the contract has the following details:
-expiry end of December, forward price $1.49/£, contract size £25,000

-implementing a “range” or “collar” trade. In addition to the Put options detailed above, the following Call option contracts can be considered:
-strike price of $1.50, premium of $3.30 per contract, contract size of £10,000, expiry end of December
-strike price of $1.60, premium of $0.30 per contract, contract size of £10,000, expiry end of December

NOTE: the quoting of the option premium in the currency options market is somewhat unconventional…but actually relatively simple. Simply multiply the number given to get the actual dollar cost of one contract. In other words, when the premium is given as $3 the actual cost of buying 1 contract would be $3 x 100 = $300.

REQUIRED:

Produce charts which show the final combined US-$ amount received at the end of December on all four strategies above for scenarios where the US-$/British-£ exchange rate in December ends up being $1.20/£, $1.25/£, $1.30/£, $1.35/£, $1.40/£, $1.45/£, $1.50/£, $1.55/£, $1.60/£, $1.65/£, $1.70/£, $1.75/£, and $1.80/£.


I will paypal someone 100$ to complete this, tonight.