Assuming that a September put option to buy a share for $100 costs $4.50 and is held until September. Under what circumstances will the holder of this option make a profit? Under what circumstances will the option be exercised? Draw a diagram showing how the profit on a long position in the option depends on the stock price at the maturity of the option.
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- Suppose that a June call option to buy a share for $65 costs $3.5 and is held until June. Under what circumstances will the holder of the option make profit Under what circumstances will the option be exercised? Draw a diagram showing how the profit on a long position in the option depends on the stock price at the maturity of the option.A trader buys a call option on a share for K2. The stock price is K25 and the strike price is K20. State the circumstances under which the trader will make a profit. State the circumstances under which the option will be exercised. Draw a diagram in support of your answers above, showing the variation of the trader’s profit with the stock price at the maturity of the option.3. Suppose that a June put option to sell a share for $60 costs $4 and is held until June. (a) short position) make a profit? Under what circumstances will the seller of the option (i.e., the party with a (b) Under what circumstances will the option be exercised? (c) depends on the stock price at the maturity of the option. Draw a diagram showing how the profit from a short position in the option
- Which of the following positions in options benefit if the underlying stock price increases? Assume the options have several months remaining until the exercise date. a. Short position in call and long position in put b. Short position in both call and put c. Long position in a put d. Long position in call and short position in put e. Short position in a call f. Short position in a put g. Long position in a callA PUT and a CALL option are written on a stock with a strikeprice of $60. The options are held until expiration. Suppose the stock price at expiration is $75. Call premium is $16 and Put premium is $3. The CALL option will ___ because the call is ___. But the PUT option will ___ because the put is ___, with a TIME VALUE of ___.a) Be exercised; in-the-money; not be exercised; out-of-the-money; zerob) not be exercised; out-of-the-money; be exercised; in-the-money; zeroc) Be exercised; in-the-money; not be exercised; out-of-the-money; 1d) Be exercised; in-the-money; be exercised; in-the-money; zeroe) None of the above is correctConsider two put options on different stocks. The table below reports the relevant information for both options: Put optionTime to maturityCurrent price of underlying stockStrike priceVolatility ( )X1 year$27$1830%Y1 year$25$2030%All else equal, which put option has a lower premium? A.Put option Y B.Put option X
- Suppose that a call option with a strike price of $48 expires in one year and has a current market price of $5.17. The market price of the underlying stock is $46.25, and the risk-free rate is 1%. Use put-call parity to calculate the price of a put option on the same underlying stock with a strike of $48 and an expiration of one year. The price of a put option on the same underlying stock with a strike of $48 and an expiration of one year is $. (Round to the nearest cent.)Calculate the profit or loss per share of stock to an investor who buys a call option on a stock whose price is K90 but a call option exercise price if K100 if the stock price at expiration is K105. Calculate the profit or loss for a purchaser of a put option with the same exercise price and expiration?A PUT and a CALL option are written on a stock with a strikeprice of $60. The options are held until expiration. 1. Calculate the intrinsic value of the CALL option if the stock is currently selling for$75a) $0b) $15c) -$15d) $57e) 63f) None of the above 2. Calculate the breakeven stock price for the CALL option if the premium is $16. What is the time value of the call?a) $63; $1b) $57; $0c) $76; $16d) $55; $3e) $76; $1f) None of the above 3. Suppose the stock price at expiration is $75. Call premium is $16. The CALL optionWRITER’S profit would be:a) -$3b) $3c) -$15d) $15e) None of the above
- 8. Buy one July 170 put contract. Hold it until the option expires. Determine the profits and display the results in a chart (include profits for the following underlying stock prices: 130,140,150,160,170,180,190). Identify the breakeven stock price at expiration. What is the maximum possible gain and loss on the transaction?Suppose a April put option to sell share of company for Rs 500 cost Rs 40 and is held until April. Under what circumstance the seller of the option (i.e party in the short position) make a profit. Under what circumstances the option will be exercised ?.Draw a diagram illustrating how the profit from the short position is dependent on the share price at the maturity of option.A PUT and a CALL option are written on a stock with a strikeprice of $60. The options are held until expiration.1. Calculate the intrinsic value of the PUT option if the stock is currently selling for $75.a) $0b) $15c) -$15d) $57e) 63f) None of the above 2. Calculate the breakeven stock price for the PUT option if the premium is $3. What is the time value of the put?a) $63; $3b) $57; $3c) $55; $0d) $76; $0e) $55; $0f) None of the above 3. Suppose the stock price at expiration is $75. Put premium is $3. The PUT optionWRITER’S profit would be:a) -$3b) $3c) -$15d) $15e) None of the above