Consider a U.S. exchange-traded call option contract to buy 100 shares with a strike price of $37 and maturity in six months. Explain how the terms of the option contract would be revised if the specified change involving the underlying stock were to occur. What would be the revised strike price contract if there were a 5-for 1 stock split? Report your answer rounded to dollars and cents.

Consider a U.S. exchange-traded call option contract to buy 100 shares with a strike price of $37 and maturity in six months. Explain how the terms of the option contract would be revised if the specified change involving the underlying stock were to occur. What would be the revised strike price contract if there were a 5-for 1 stock split? Report your answer rounded to dollars and cents.

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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Assume that you have shorted a call option on Intuit stock with a strike price of $40. The option will expire in exactly three months' time. a. If the stock is trading at $55 in three months, what will you owe? b. If the stock is trading at $35 in three months, what will you owe? c. Draw a payoff diagram showing the amount you owe at expiration as a function of the stock price at expiration. a. If the stock is trading at $55 in three months, what will you owe? If the stock is trading at $55 in three months, you will owe $ (Round to the nearest dollar.)
Consider the following one-year European-style options relating to one share of XYZ stock, currently priced at $100. Which of the following has the largest payoff if the stock price in one year is $99.5? Possible Answers A A cash-or-nothing call with strike price $100. B An asset-or-nothing call with strike price $100. C A cash-or-nothing put with strike price $100. An asset-or-nothing put with strike price $100.
Stock options, gold options and index options are examples of options where the underlying assets are stocks, gold and stock market index, respectively. What is the difference between European and American option? Are European options available exclusively in Europe and American options available exclusively in the United States? You own a call option on Intuit stock with a strike price of RM36. The option will expire in exactly three months’ time. If the stock is trading at RM46 in three months, what will be the payoff of the call? If the stock is trading at RM32 in three months, what will be the payoff of the call? Draw a payoff diagram showing the value of the call at expiration as a function of the stock price at expiration. Suppose that a June put option to sell a share for RM10 costs RM2 and is held until June. Under what circumstances will the seller of the option make a profit? Under what circumstances will the option exercised?
Suppose you purchase a put option to sell General Motors common stock at $80 per share in March. The current price of GM stock is $83 and the time value of the option is $1. What is the intrinsic value of the option?
What is the value of a European put option if the underlying stock price is $36, the strike price is $29, the underlying stock volatility is 41 percent, and the risk-free rate is 4 percent? Assume the option has 150 days to expiration. (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) Value of a European put option $
A trader buys a European put on a share for K3. The stock price is K42 and the strike price is K40. 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
Suppose an investor purchases a 3-month call option and a 3-month put option on ABC stock. The strike of the call option is $60; the strike of the put option is $65. Suppose the price of the put option is $4.20, the price of the call option is $3.50. a. Suppose the price of ABC stock at option expiry is $62 per share. What is the payoff and profit/loss on both options positions? b. What is the maximum profit the investor could have earned on his call option position? On the put position? Edit Minit
You wish to build a synthetic long call for Microsoft stock with a strike price of $40.00 and an expiration of March. Microsoft stock currently sells for $40. The March 40 call for MSFT has a premium of $1.25, while the March 40 put for MSFT has a premium of $3.75. What will be the value of your position if at expiration Microsoft stock is selling for $45.00? Assume one contract on the option. Enter loss as a negative number.
You own a call option on Intuit stock with a strike price of $40. The option will expire in exactly three months’ time. If the stock is trading at $55 in three months, what will be the payoff of the call? Note: practice drawing the payoff diagram. Assume that you have shorted the call option in Question 2. If the stock is trading at $55 in three months, what will you owe? Note: practice drawing the payoff diagram. (ONLY ANSWER THIS QUESTION)
Give typing answer with explanation and conclusion What is the lower bound for the price of a 7-month European call option on a non-dividend-paying stock when the stock price is $44.02, the strike price is $39, and the risk-free interest rate is 1.3% per annum? Report your answer in dollars and cents.
An investor buys a European call option at a price of 7.6 yuan. The stock price is 52 yuan and the strike price is 55 yuan. Under what circumstances will the investor make a profit ? Under what circumstances will the option be executed ? Draw a diagram of the relationship between investor profitability and stock price at maturity.
Today on August 18 Tesla Inc. stock (TSLA) trades at a spot price of $220 per share. A trader decides to buy a European call option contract (= 100 call options) on the stock with a strike price of $220 and maturity September 15 (i.e., in one month). The price of the European call option contract is $12 per option. (i) Under what circumstances does the trader make a gain on September 15? (ii) What is the maximum possible gain for the trader? (iii) What is the maximum possible loss for the trader? Provide short answers for (i). (ii), (iii).

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