An option to buy a stock is priced at $210. If the stock closes above 30 on May 15, the option will be worth $900. If it closes below 20, the option will be worth nothing, and if it closes between 20 and 30 (inclusively), the option will be worth $180. A trader thinks there is a 45% chance that the stock will close in the 20–30 range, a 25% chance that it will close above 30, and a 30% chance that it will fall below 20 on May 15. How much do they expect to gain? Should they buy the stock option? Explain.
Unitary Method
The word “unitary” comes from the word “unit”, which means a single and complete entity. In this method, we find the value of a unit product from the given number of products, and then we solve for the other number of products.
Speed, Time, and Distance
Imagine you and 3 of your friends are planning to go to the playground at 6 in the evening. Your house is one mile away from the playground and one of your friends named Jim must start at 5 pm to reach the playground by walk. The other two friends are 3 miles away.
Profit and Loss
The amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item.
Units and Measurements
Measurements and comparisons are the foundation of science and engineering. We, therefore, need rules that tell us how things are measured and compared. For these measurements and comparisons, we perform certain experiments, and we will need the experiments to set up the devices.
An option to buy a stock is priced at $210. If the stock closes above 30 on May 15, the option will be worth $900. If it closes below 20, the option will be worth nothing, and if it closes between 20 and 30 (inclusively), the option will be worth $180. A trader thinks there is a 45% chance that the stock will close in the 20–30
How much do they expect to gain? Should they buy the stock option? Explain.
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