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Calculate the insurance value of each option.

Assignment: Download some futures prices with at least 6 expirations, and 6 call option prices on the same underlying. Data are available, for example, from the CME-NYMEX website. Then answer the following questions. 1)

For the futures prices, calculate the difference between the price today (called the “spot price) of the underlying and the forward prices that you have downloaded: Forward price – spot price This difference is called the “forward premium”. You should calculate 6 of them corresponding to the 6 expirations. What do these numbers tell you about the future of spot prices? How do you know? 2) For the options quotes data that you downloaded, provide a brief summary of the range of strike prices, maturities and premia that you found. 3) In the form of a table, report which options are out-of-the money and which are in-the-money. Calculate the moneyness of each option. 4) Calculate the insurance value of each option.

 

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