Option Put Strike price 480 per share Current Market Value 500 per share Contract size 10,000 shares Option Put Contract size 1,000 tons Strike price 65,000 per ton Current Market Value 70,000 per ton
Option Put Strike price 480 per share Current Market Value 500 per share Contract size 10,000 shares Option Put Contract size 1,000 tons Strike price 65,000 per ton Current Market Value 70,000 per ton
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
1.) The option is currently
a.) In-the-money
b.) At-the-money
c.) Out-the-money
2.) In/At/Out- the money by _____ pesos.
Transcribed Image Text:Option
Put
Strike price
480 per share
Current Market Value
500 per share
Contract size
10,000 shares
Transcribed Image Text:Option
Put
Contract size
1,000
tons
Strike price
65,000 per ton
Current Market Value
70,000 per ton
Expert Solution
Step 1
Put option
It gives its holder the right to sell the stock at the pre-specified price known as strike price at the future maturity date.
The pay off of put option is given as shown below.
Based on this payoff, it can be concluded that
- payoff or the option is in the money when strike price is more than stock price. In this case, the difference of strike and stock price will be a positive value, which will be the payoff.
- payoff or the option is out of the money when strike price is less than stock price. In this case, the difference of strike and stock price will be a negative value.
- payoff or the option is at the money when strike price is equal to stock price. In this case, the difference of strike and stock price will be zero.
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