- September 3, 2023 at 11:03 am #691237james8500Participant
- Topics: 67
- Replies: 17
re above question:
1. Under the premium calculation under the collar method at a stike price of 96 – why has the examiner decided to buy a put at 96 and sell a call at 96.5. I thought when calculating options – we must use the same strike price in which case:
Premium payable on put: 0.163/400*(37*1000) = 15
Premium receivable on call: 0.391/400*(37*1000) = 36.17
Net premium receivable: 21.16
2. In calculating the unexpired basis under the option method (in the event of an increase of 0.5%)
Theoretical futures price (100-3.3) = 96.70
Strike price 96.00
Unexpired basis: (0.7*2/6) = 0.233
Estimated future price in 4 months = (100-3.8-0.233) = 95.96
The examiner is still using the initial basis calculated under the futures method. Does the basis calculation I made make sense?
3. In the question we are given the tick size 0.01% and tick value $25.
I did not use the tick method when calculating the gain/loss on futures contracts:
I used (sell price-buy price)/400*(37*1000)
Does this suffice?
Sorry for bombarding you.
ThanksSeptember 3, 2023 at 3:12 pm #691246John MoffatKeymaster
- Topics: 56
- Replies: 53169
1. A collar will use two different strike prices. (Using the same strike price for both will effectively fix the interest rate rather than produce a collar).
Do watch my free lectures on this.
2. The options are options to buy or sell futures so the workings for the futures will be the same. Again, do please watch my lectures.
3. That is fine – you do not need to use ticks.
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