The following table lists prices of Amazon options in January 2018 when Amazon stock was selling for $1,200. Exercise Price Expiration Date April 2018 Call Price Put Price $ 31.10 $1,200 1,300 1,400 $1,200 1,300 1,400 $1,200 1,300 1,400 $132.70 73.20 70.10 33.00 $161.70 134.20 July 2018 $ 53.55 104.00 96.00 62.55 156.05 January 2019 $210.00 155.35 $ 88.05 133. 25 112.00 190.00 Suppose that by January 2019, the price of Amazon could either rise from its January 2018 level to $1,200 × 1.25 = $1,500.00 or fall to $1,200/1.25 = $960.00. a. What would be your percentage return on a January expiration call option with an exercise price of $1,200 if the stock price rose? (Round your answer to 2 decimal places.) b. What would be your percentage return if the stock price fell? (Negative value should be indicated by a minus sign.) =. Which is riskier: the stock or the option?
The following table lists prices of Amazon options in January 2018 when Amazon stock was selling for $1,200. Exercise Price Expiration Date April 2018 Call Price Put Price $ 31.10 $1,200 1,300 1,400 $1,200 1,300 1,400 $1,200 1,300 1,400 $132.70 73.20 70.10 33.00 $161.70 134.20 July 2018 $ 53.55 104.00 96.00 62.55 156.05 January 2019 $210.00 155.35 $ 88.05 133. 25 112.00 190.00 Suppose that by January 2019, the price of Amazon could either rise from its January 2018 level to $1,200 × 1.25 = $1,500.00 or fall to $1,200/1.25 = $960.00. a. What would be your percentage return on a January expiration call option with an exercise price of $1,200 if the stock price rose? (Round your answer to 2 decimal places.) b. What would be your percentage return if the stock price fell? (Negative value should be indicated by a minus sign.) =. Which is riskier: the stock or 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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Transcribed Image Text:The following table lists prices of Amazon options in January 2018 when Amazon stock was selling for $1,200.
Exercise
Price
Expiration Date
April 2018
Call Price Put Price
$ 31.10
$1,200
1,300
1,400
$1,200
1,300
1,400
$1,200
1,300
1,400
$132.70
73.20
70.10
134.20
$ 53.55
96.00
33.00
July 2018
$161.70
104.00
62.55
156.05
January 2019
$210.00
$ 88.05
155.35
133.25
112.00
190.00
Suppose that by January 2019, the price of Amazon could either rise from its January 2018 level to $1,200 × 1.25 = $1,500.00 or fall to
$1,200/1.25 = $960.00.
a. What would be your percentage return on a January expiration call option with an exercise price of $1,200 if the stock price
rose? (Round your answer to 2 decimal places.)
b. What would be your percentage return if the stock price fell? (Negative value should be indicated by a minus sign.)
c. Which is riskier: the stock or the option?
a. Percentage return
b. Percentage return
Which is riskier: the stock or the option?
%
(100) %
Option
C.
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