What is the value of a call option or a put option if the stock price is zero? What if the stock price is extremely high (relative to the strike price)?

Explain why an American call options on futures could be optimally exercised early while call options on the spot can not be optimally exercised. Assume that there is no dividend. Explain how to use call options and put options to create a synthetic short position in stock.

If the stock price increases, the price of a put option on that stock ________ and that of a call option _________.     decreases, increases     decreases, decreases     increases, decreases     increases, increases

(15) The is the stock price minus exercise price, or the profit that could be attained by immediate exercise of an in-the-money call option. *A) intrinsic value B) time value C) stated value D) discounted value

In equilibrium, we assume that a stock's price does not equal its intrinsic value. Group of answer choices True False

What is the difference between the long and the short positions in a contract for the future delivery of the S&P 500 stock index? If you expect stock prices to fall, do you buy or sell stock index futures?View Solution: What is the difference between the long and the short

The buyer of a call option on stock benefits if the underlying stock price rises or if the volatility of the stock's price increases. Select one: True False

Describe what a stock option is. what does it means to buy a "put" or a "call" and what you are expecting the stock to do for each (ie go up or down in price). Discuss when you would make money on a put option and when you would make money on a call option.

Using the Black-Scholes option pricing formula to determine how many of the following statements are false:              [I]         The higher the dividend payout, the cheaper the put option, all else equal            [II]         The put value decreases with volatility, all else equal          [III]         The lower the current stock price, the cheaper the put option, all else equal

(a) What is the expected shape of a futures curve for cotton (a storable commodity)? What about for live hogs (a non-storable commodity)?  (b) Explain why a rational economic agent may still choose to hold stocks even if the expected return on stocks is negative.