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standard deviation stock that will return ​$100 profit if the stock goes up today and lose ​$500 if it goes down.

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Asked: Jul 05,2019 In: Distributions
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name tutor Punditsdkoslkdosdkoskdo
Asked: Jul 05,2019 In: Distributions

standard deviation stock that will return ​$100 profit if the stock goes up today and lose ​$500 if it goes down.

A day trader buys an option on a stock that will return ​$100 profit if the stock goes up today and lose ​$500 if it goes down. If the trader thinks there is a 70% chance that the stock will go​ up, find the standard deviation of the day​ trader's option value.


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tutor Added an answer on Jul 05,2019
x p x.p x2.p
100 0.7 70 7000
-500 0.3 -150 75000
       
Expected value   -80 82000
       
standard deviation   274.9545  

 

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