You buy one Huge-Packing August European call contract and one Huge-Packing August European put contract. Both options are "at the money" and are on 100 shares of Huge-Packing stock each. The call premium is $1.25, and the put premium is $4.50. The current price of the Huge-Packing stock is $50 per share. Disregarding time value of money considerations, at expiration, your highest potential loss from this position is $450 unlimited $275 $125 $575

Vijay

With formulas, no tables Exploring six-month call and put options for a stock with an exercise price of $20 and a call premium of $4 per contract, your consideration involves the potential purchase of 20 call options. Let's analyze the following scenarios: a) In the context of contemplating the acquisition of 20 call options, visualize the profit and losses at the expiration date of your position, disregarding any transaction costs. Calculate the potential gain if the stock price stands at $20 in six months. Determine the break-even point and assess the potential gain if the stock price rises to $27 in six months. b) Examine the profit and losses for the writer (seller) of the call option. What constitutes the maximum profit for the call writer, and what represents the maximum loss for the call writer? c) Shift attention to a put option for the same stock, sharing the same strike price and maturity, traded on the market at a price of $3. Present the profit and losses at the expiration…

Suppose you think company Y’s share is going to appreciate substantially in value next year. The current share of company Y is $150. One call option of this company’s share expiring in one year is currently available at $15 with an exercise price of $150. With $150,000 to invest, you are considering three investment strategies: a. Invest all $150,000 b. Invest all $150,000 in options c. Buy 5,000 options and invest the remaining amount in treasury bills paying 5% annually What is the value of your portfolio and your rate of return for each strategy for the following share prices one year from now? Summarise your results in a table and draw a graph showing return for each alternative (Hint: show return on Y axis and share price on X axis). Share prices $130, $140, $150, $160 and $170