Chapter 21, Problem 1P

Summary Introduction

(a) To identify:

The option contract with most trades.

Introduction:

Option refers to a type of derivatives that establish a deal between writes or seller of the option and the buyer of the option to exchange an asset known as underlying asset at a predetermined price, date and quantity.

Summary Introduction

(b) To identify:

The option contract that is held most, overall.

Introduction:

Open Interest refers to the term that depicts the available open position in a stock market for a specified security. It will be processed as a trade if matched with a contra party or opposite party.

Summary Introduction

(c) To determine:

The amount needs to be paid to buy one option.

Introduction:

Option Premium is the amount that is paid or received in exchange to acquire or sell an option. It is used to determine the value of the option.

Summary Introduction

(d) To determine:

The amount needs to be paid to buy one option.

Introduction:

Option Premium is the amount that is paid or received in exchange to acquire or sell an option. It is used to determine the value of the option.

Summary Introduction

(e) To identify:

The call and put option that is in-the-money.

Introduction:

In-the-money is the term used to describe if a option is profitable or not. If the stock price is less than the strike price than the put option will be in-the-money and if the strike price is more than the current stock price than the call option will be in-the money.