Assuming that a September put option to buy a share for $100 costs $4.50 and is held until September. Under what circumstances will the holder of this option make a profit? Under what circumstances will the option be exercised? Draw a diagram showing how the profit on a long position in the option depends on the stock price at the maturity of the option.

Assuming that a September put option to buy a share for $100 costs $4.50 and is held until September. Under what circumstances will the holder of this option make a profit? Under what circumstances will the option be exercised? Draw a diagram showing how the profit on a long position in the option depends on the stock price at the maturity of the option.

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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Which of the following call options on XYZ stock is most valuable? 1. Strike price = $ 40, 3 months to expiration 2. Strike price = $ 40, 3 months to expiration 3. Strike price = $ 50, 6 months to expiration 4. Strike price = $ 50, 6 months to expiration
One month ago you purchased a put option on the S&P500 Index with an exercise price of $900.00. Today is the expiration date, and the index is at $896.46. a. Will you exercise the option? b. What will be your profit?
A stock is currently trading for $25 per share and an investor is interested in the following two options with a one year expiration term. Options Call Put Strike Price $28 $24 Quoted Price $2 $4 a) Calculate the intrinsic values of the call and put. b) Draw the profit diagram for a short position in the put option described above. Label the diagram well. Show all the critical points on the diagram. For example, the intercepts on axes, maximum profit or maximum loss. What price movements are required for the investor to have a positive profit? c) Draw the profit diagram for a long position in the call option. And label the diagram well. d) Suppose one month later, the stock price moves up to $30 per share, how will the prices of the call and put change? Why? Briefly explain. e) Suppose an investor purchased 10 contracts of the 28 calls and sold 10 contracts of the 24 puts. If the stock price turns out to be $30 per share in one month, what is the total profit for this investor?
You bought (that is, you are “long”) both a put option and a call option on Strockfoot stock with the same expiration date. The exercise price of the call option is $40 and the exercise price of the put option is $30. Carefully graph the payoff of the combination of options at expiration.
Consider a put option whose underlying asset is a stock index with 6 months to expiration and a strike price of $1000. Suppose the risk-free interest rate for the six months is 2% and that the option’s premium is $74.20. (a) Find the future premium value in six months. (b) What is the buyer’s profit is the index spot price is $1100? (c) What is the buyer’s profit is the index spot price is $900 Only typed answer
Question 5: Suppose that a March call option to buy a share for $50 costs $2.50 and is held until March. Under what circumstances will the holder of the option make a profit? Under what circumstances will the option be exercised? Draw a diagram showing how the profit on a long position in the option depends on the stock price at the maturity of the option.Plz explain it
A stock currently trades at $100. Consider a put and a call option written on this stock with strike price $105. Which of the following statements is most accurate? A.The call option is in-the-money and the put option is out-of-the-money B.The call option is out-of-the-money and the put option is in-the-money C.Both options are in-the-money D.Cannot determine without further information
Your Question : Please introduction and correct and incorrect option explain!
A stock is currently selling for $39. In one period, the stock will move up by a factor of 1.29 or down by a factor of .53. A call option with a strike price of $50 is available. If the risk-free rate of interest is 2.5 percent for this period, what is the value of the call option?
You currently have a position on a covered call. A covered call is a combination of a long stock and a short call on the same stock. You purchased the stock at the price of $50 and short the call at the premium of $3. The call option has an exercise price of $55. If the stock price increases to $54, what is your net income?

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