Question: Question 13 You Are Given The Following Data On Call And Put Premiums In Pence Per Share For Company ABC Shares Which Are Currently Priced In The Market At 510 Pence. Each Contract Refers To 1000 Shares. I. You Expect The Share Price To Rise To 700 Pence. Discuss A Speculative Strategy And The Profits/losses At A Range Of Different Prices For The Underlying …

Question 13

You are given the following data on call and put premiums inpence per share for Company ABC shares which are currently pricedin the market at 510 pence. Each contract refers to 1000shares.

i. You expect the share price to rise to 700 pence. Discuss aspeculative strategy and the profits/losses at a range of differentprices for the underlying share in December.

ii. You own 1000 shares in Company ABC and fear that the shareprice might fall to 300 pence. Discuss a hedging strategy using theabove contracts and give the approximate value of your net hedgedposition at a range of different prices for the underlying share inDecember.