You purchase one Virgin Galactic March 120 put contract (equalling 1000 shares) for a put premium of $10. You hold the option until the expiration date, when Virgin Galactic stock sells for $123 per share. a) How much is the realized profit/loss on the transaction? b) What is the maximum profit that you can realize on this position? c) What is biggest loss that you can suffer on this position? d) What is the realized profit/loss of your counterparty (the buyer of this call option)?
You purchase one Virgin Galactic March 120 put contract (equalling 1000 shares) for a put premium of $10. You hold the option until the expiration date, when Virgin Galactic stock sells for $123 per share. a) How much is the realized profit/loss on the transaction? b) What is the maximum profit that you can realize on this position? c) What is biggest loss that you can suffer on this position? d) What is the realized profit/loss of your counterparty (the buyer of this call 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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You purchase one Virgin Galactic March 120 put contract (equalling 1000 shares) for a put premium of $10. You hold the option until the expiration date, when Virgin Galactic stock sells for $123 per share.
a) How much is the realized
b) What is the maximum profit that you can realize on this position?
c) What is biggest loss that you can suffer on this position?
d) What is the realized profit/loss of your counterparty (the buyer of this call option)?
Please briefly explain the calculations as well, thanks!
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