Business, 31.07.2020 23:01 mrsjenrucker

Given the following information on the available options, you need to hedge the underlying commodity as a producer with a zero-cost collar. A zero-cost collar means buying a put option and writing a call option that has the closest premium to the put. The underlying price is $630. You choose a one-year put option with $620 strike. Jan-21-64 Expire Strike Call Put
PV
630 Jan-21-65 500 158.4511 25.58539
630 Jan-21-65 530 138.3005 35.22183
630 Jan-21-65 560 120.0379 46.75599
630 Jan-21-65 590 103.6494 60.17585
630 Jan-21-65 620 89.07566 75.42293
630 Jan-21-65 650 76.22209 92.40239
630 Jan-21-65 680 64.96979 110.9945
630 Jan-21-65 710 55.18534 131.0646
630 Jan-21-65 740 46.72803 152.4702
630 Jan-21-65 770 39.45681 175.0686
What is the strike of the call option that you need to write to create a nearly zero-cost collar?
a. 650
b. 680
c. 710
d. 740

Answers: 1

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Given the following information on the available options, you need to hedge the underlying commodity...

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