b) Jay is holding some Tesla shares (NASDAQ: TSLA) and The TSLA stocks are currentlytrading at $985 on the Nasdaq. Given TSLA stocks are very volatile, Jaleel wishes toprotect the value of his investments. He seeks your advice on using option contractsand presents a list of options for you to choose from. Assume the number of underlyingshares per contract is 100 shares.Strike$975$980$985$1005(i)(ii)Call premium Moneyness$10.01$4.45$0.63$0.05Put premium Moneyness$0.01$0.04$0.99$20.48Please specify the moneyness of the above options. Are they in the money, atthe money, or out of the money?Explain the type of risk that Jay is facing and which option is your suggestionto control his risk, provide your reason and explain it.

Given, The price of the stock is $985

(i) (ii) Please specify the moneyness of the above options. Are they in the money, at the money, or out of the money? Explain the type of risk that Jay is facing and which option is your suggestion to control his risk, provide your reason and explain it.

(i) (ii) Please specify the moneyness of the above options. Are they in the money, at the money, or out of the money? Explain the type of risk that Jay is facing and which option is your suggestion to control his risk, provide your reason and explain it.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

100%

b) Jay is holding some Tesla shares (NASDAQ: TSLA) and The TSLA stocks are currently
trading at $985 on the Nasdaq. Given TSLA stocks are very volatile, Jaleel wishes to
protect the value of his investments. He seeks your advice on using option contracts
and presents a list of options for you to choose from. Assume the number of underlying
shares per contract is 100 shares.
Strike
$975
$980
$985
$1005
(i)
(ii)
Call premium Moneyness
$10.01
$4.45
$0.63
$0.05
Put premium Moneyness
$0.01
$0.04
$0.99
$20.48
Please specify the moneyness of the above options. Are they in the money, at
the money, or out of the money?
Explain the type of risk that Jay is facing and which option is your suggestion
to control his risk, provide your reason and explain it.

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