Current futures prices ($/barrel): Oct 70.01; Dec 69.78; Mar 69.40. Contract size: 1000 barrels WTI crude oil put premium quotes ($/barrel) Strike price ($/barrel) Oct ‘21 Dec
Current futures prices ($/barrel): Oct 70.01; Dec 69.78; Mar 69.40. Contract size: 1000 barrels WTI crude oil put premium quotes ($/barrel) Strike price ($/barrel) Oct ‘21 Dec
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
Related questions
Question
Current futures prices ($/barrel): Oct 70.01; Dec 69.78; Mar 69.40.
Contract size: 1000 barrels
| WTI crude oil put premium quotes ($/barrel) | |||
| Strike price ($/barrel) | Oct ‘21 | Dec ‘21 | Mar ‘21 |
| 69.00 | 1.00 | 4.20 | 7.10 |
| 69.50 | 1.10 | 4.30 | 7.30 |
| 70.00 | 1.20 | 4.62 | 7.90 |
| 70.50 | 1.49 | 4.92 |
8.2 |
1. Suppose the speculator still holds the put option at the expiry date. If the futures price at expiry is $73/barrel, should he:
(i) Do nothing
(ii) Exercise the option
2. Suppose the speculator still holds the put option at the expiry date. If the futures price at expiry is $67/barrel, should he:
(i) Do nothing
(ii) Exercise the option
Expert Solution
Step 1
Put has value when expiration prices are below the strike price but no value if prices are above the strike price.
Step by step
Solved in 2 steps
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