5) The current price of UCD Inc. is $15 per share; put options and call options on the stock both have a strike price of $15 and are selling for $0.75 per option. a) Suppose on the expiration date the price of UCD Inc. ends up being $18 per share. What is the profit/loss on a portfolio that has 1 share of stock and a long 1 put option? What about one that has 1 share of stock and is a short 1 call option? b) Suppose someone had bought 50 call options and the price ends up being $18 per share. What would be the profit/loss on that?
5) The current price of UCD Inc. is $15 per share; put options and call options on the stock both have a strike price of $15 and are selling for $0.75 per option. a) Suppose on the expiration date the price of UCD Inc. ends up being $18 per share. What is the profit/loss on a portfolio that has 1 share of stock and a long 1 put option? What about one that has 1 share of stock and is a short 1 call option? b) Suppose someone had bought 50 call options and the price ends up being $18 per share. What would be the profit/loss on that?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![5) The current price of UCD Inc. is $15 per
share; put options and call options on the
stock both have a strike price of $15 and are
selling for $0.75 per option.
a) Suppose on the expiration date the price of
UCD Inc. ends up being $18 per share. What
is the profit/loss on a portfolio that has 1
share of stock and a long 1 put option? What
about one that has 1 share of stock and is a
short 1 call option?
b) Suppose someone had bought 50 call
options and the price ends up being $18 per
share. What would be the profit/loss on that?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F81007c2a-8e47-4585-9e51-0edd5604c694%2Fa5416c75-3e84-451f-bb12-ed28e7d64aec%2F27ekie5_processed.jpeg&w=3840&q=75)
Transcribed Image Text:5) The current price of UCD Inc. is $15 per
share; put options and call options on the
stock both have a strike price of $15 and are
selling for $0.75 per option.
a) Suppose on the expiration date the price of
UCD Inc. ends up being $18 per share. What
is the profit/loss on a portfolio that has 1
share of stock and a long 1 put option? What
about one that has 1 share of stock and is a
short 1 call option?
b) Suppose someone had bought 50 call
options and the price ends up being $18 per
share. What would be the profit/loss on that?
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