Suppose that you purchased a call option on the S&P 100 Index. The option has an exercise price of 1,680, and the index is now at 1,720. What will happen when you exercise the option? You will have to pay $1,680. You will receive $4,000. You will receive $1,680. (WRONG) You will have to pay $4,000. You will receive $

Suppose that you purchased a call option on the S&P 100 Index. The option has an exercise price of 1,680, and the index is now at 1,720. What will happen when you exercise the option? You will have to pay $1,680. You will receive $4,000. You will receive $1,680. (WRONG) You will have to pay $4,000. You will receive $

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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Suppose that you purchased a call option on the S&P 100 Index. The option has an exercise price of 1,680, and the index is now at 1,720. What will happen when you exercise the option? You will have to pay $4,000. You will receive $1,720. You will receive $4,000. You will have to pay $1,680. You will receive $1,680.
Suppose that you purchased a call option on the S&P 100 Index. The option has an exercise price of 1,680, and the index is now at 1,720. What will happen when you exercise the option?
Suppose you combine two option contracts as follows. You buy a call option on a stock with an exercise price of $65 for a premium of 9$. At the same time you sell a call option on the same stock with an exercise price of $75 for a premium of $4. Both calls expire at the same time. The stock sells currently at $72. Answer the following questions about this investment strategy: 1. Determinethevalueatexpiration(thepayoffs)andtheprofitunderthefollowingoutcomes: a. The price of the stock at expiration is $78b. The price of the stock at expiration is $69c. Thepriceofthestockatexpirationis$62 2. Determine the following:a. The maximum profit b. The maximum loss 3. Determinethebreakevenstockpriceatexpiration(thestockpriceforwhichyourstrategydeliversno profit and no loss). 4. Depictthepayoffandprofitdiagramsofyourinvestmentstrategy.
Suppose you write the following put option (1 option, not 1 contract containing 100 options). What is the payoff and profit at expiration if the stock price is $75? Put Strike Symbol 80 ABC210621C00040000 Last 3.32 a. payoff is -5.00; profit is 1.68 X b. payoff is -5.00; profit is 3.32 c. payoff is 0; profit is 0 d. payoff is -5.00; profit is -1.68 e. payoff is 0; profit is -3.32 Chg 1.47
Suppose that you hold a call option on S&P 500 Index ETF with an exercise price of $450 and a put option on the same underlying with an exercise price of $430. Today the price of S&P 500 Index ETF is $460. Which of the following is correct? Choose only one: The payoffs of your call option and put option, respectively, today are $10 and $30. The payoffs of your call option and put option, respectively, today are $10 and –$30. The payoffs of your call option and put option, respectively, today are $10 and $0. The payoffs of your call option and put option, respectively, today are –$10 and $30. NONE of the above. Full explain this question text typing work only
You have written a call option on Walmart common stock. The option has an exercise price of $81, and Walmart’s stock currently trades at $79. The option premium is $1.60 per contract. a. How much of the option premium is due to intrinsic value versus time value? b. What is your net profit if Walmart’s stock price decreases to $77 and stays there until the option expires? c. What is your net profit on the option if Walmart’s stock price increases to $87 at expiration of the option and the option holder exercises the option?
You buy a put option on IBM common stock. The option has an exercise price of $136 and IBM’s stock currently trades at $140. The option premium is $5 per contract.a. What is your net profit on the option if IBM’s stock price increases to $150 at expiration of the option and you exercise the option? b. How much of the option premium is due to intrinsic value versus time value?c. What is your net profit if IBM’s stock price decreases to $130?d. Draw the payout diagram at maturity on a short put option position, option premium = $2, and the same exercise price... (Please give the full solution I will upvote)
You have purchased a put option on Pfizer common stock. The option has an exercise price of $45 and Pfizer's stock currently trades at $47. The option premium is $0.60 per contract. a. What is your net profit on the option if Pfizer's stock price does not change over the life of the option? b. What is your net profit on the option if Pfizer's stock price falls to $41 and you exercise the option? (For all requirements, negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16)) a Net profit b. Net profit per share per share
Suppose that a call option to buy a share for $200 costs $10. What is the delta of this option today if the current stock price is $180? (ignore time value of the option) A. around 2 B. None of these answers are correct. C. around 0.5 D. close to 0 E. close to 1
Suppose you buy one SPX call option with a strike of 1,470 and write one SPX call option with a strike of 1,495. What are the "per share" (i.e., per unit) payoffs at maturity to this position for S&P 500 Index levels of 1350, 1400, 1450, 1500, and 1550? (Negative answers should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required.) Index level 1350 1400 1450 1500 1550 Long call payoff Short call payoff Total payoff
You are the buyer of a call option which expires today. The call premium is $0.75 and the exercise price is $ 13.50. The underlying stock price is 12.50. What is your profit or loss? Group of answer choices Gain $0.75 Gain $1 Loss $0.75 Loss $0.25 None of the above.
One month ago you purchased a put option on the S&P500 Index with an exercise price of $900.00. Today is the expiration date, and the index is at $896.46. a. Will you exercise the option? b. What will be your profit?

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