Refer to the stock options on Microsoft in the Figure 2.10. Suppose you buy a November expiration call option on 100 shares with the excise price of $140. Required: a-1. If the stock price at option expiration is $144, will you exercise your call? a-2. What is the net profit/loss on your position? (Input the amount as a positive value.) a-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) b-1. Would you exercise the call if you had bought the November call with the exercise price $135? b-2. What is the net profit/loss on your position? (Input the amount as a positive value.) b-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) c-1. What if you had bought the November put with exercise price $140 instead? Would you exercise the put at a stock price of $140? c-2. What is the rate of return on your position? (Negative value should be indicated by a minus sign.)

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
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Refer to the stock options on Microsoft in the Figure 2.10. Suppose you buy a November expiration call option on 100 shares with the excise price of $140.

Required:

a-1. If the stock price at option expiration is $144, will you exercise your call?
a-2. What is the net profit/loss on your position? (Input the amount as a positive value.)
a-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

b-1. Would you exercise the call if you had bought the November call with the exercise price $135?
b-2. What is the net profit/loss on your position? (Input the amount as a positive value.)
b-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
c-1. What if you had bought the November put with exercise price $140 instead? Would you exercise the put at a stock price of $140?
c-2. What is the rate of return on your position? (Negative value should be indicated by a minus sign.)

FIGURE 2.10 Stock options on Microsoft, September 4, 2019
Expiration
27-September-2019
27-September-2019
27-September-2019
15-November-2019
15-November-2019
15-November-2019
Strike
130
135
140
130
135
140
Call
8.65
4.82
1.99
11.50
8.12
5.32
Put
1.03
2.17
4.35
3.55
5.15
7.40
Note: Microsoft stock price on this day was $137.49.
Source: Compiled from data downloaded from Yahoo! Finance.
Transcribed Image Text:FIGURE 2.10 Stock options on Microsoft, September 4, 2019 Expiration 27-September-2019 27-September-2019 27-September-2019 15-November-2019 15-November-2019 15-November-2019 Strike 130 135 140 130 135 140 Call 8.65 4.82 1.99 11.50 8.12 5.32 Put 1.03 2.17 4.35 3.55 5.15 7.40 Note: Microsoft stock price on this day was $137.49. Source: Compiled from data downloaded from Yahoo! Finance.
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