4. You purchase one IBM July 250 call contract for a premium of $4 (note that July 90 means contractexpires in July and has a strike price of $250; one contract is for 100 shares). The stock has a 2 for 1split prior to the expiration date. You hold the option until the expiration date when IBM stock sellsfor $128 per share. You will realize a on the investment.A. $300 profitB. $100 lossC. $400 lossD. $200 profit

The call option is derivative product that derive value from underlying stock and it gives the…

Answered: You purchase one IBM July 250 call…

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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Similar questions

You purchase one Virgin Galactic March 120 put contract (equalling 1000 shares) for a put premium of $10. You hold the option until the expiration date, when Virgin Galactic stock sells for $110 per share. a) How much is the realized profit/loss on the transaction? b) What is the maximum profit that you can realize on this position? Explain your answer! c) What is biggest loss that you can suffer on this position? Explain your answer!d) What is the realized profit/loss of your counterparty (the buyer of this call option)? Explain your answer! Provide a long and detailed answer please <3
Both a call and a put currently are traded on stock XYZ; both have strike prices of $50 and expirations of 6 months. What will be the profit to an investor who buys the call for $4 in the following scenarios for stock prices in 6 months? What will be the profit in each scenario to an investor who buys the put for $6?a. $40b. $45c. $50d. $55e. $60
You purchase one IBM July 132 call contract for a premium of $11. You hold the option until the expiration date, when IBM stock sells for $137 per share. You will realize a on the investment. $500 loss $600 loss $600 profit $500 profit
Both a call and a put currently are traded on stock XYZ; both have strike prices of $60 and expirations of 6 months.a. What will be the profit to an investor who buys the call for $5 in the following scenarios for stock prices in 6 months? (i) $40; (ii) $45; (iii) $50; (iv) $55; (v) $60. b. What will be the profit to an investor who buys the put for $7 in the following scenarios for stock prices in 6 months? (i) $40; (ii) $45; (iii) $50; (iv) $55; (v) $60
Both a call and a put currently are traded on stock XYZ; both have strike prices of $50 and expirations of 6 months.a. What will be the profit to an investor who buys the call for $4.8 in the following scenarios for stock prices in 6 months? (i) $40; (ii) $45; (iii) $50; (iv) $55; (v) $60. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round your answers to 1 decimal place.) stock price profit i. $40 ii. $45 iii. $50 iv. $55 v. $60 b. What will be the profit to an investor who buys the put for $7.5 in the following scenarios for stock prices in 6 months? (i) $40; (ii) $45; (iii) $50; (iv) $55; (v) $60. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round your answers to 1 decimal place.) stock price profit i. $40 ii. $45 iii. $50 iv. $55 v. $60
You buy one, Jan 15, 2021 Alphabet Inc. (GOOG) put contract with strike price of $680 and pay a premium of $7. The put contract represents 100 shares of stock. What is the maximum net profit that you could gain from this strategy (be sure to include the cost of the option contract in your calculation)?
A call option on MassComputer Corp. is trading with a strike price of $100 and an expiration date on November 18th at 4 pm in the afternoon. The premium paid on the call is $5.05. What is the net profit or loss from buying the call just prior to 4 pm on November 18 if at this time the stock price per share of MassComputer is: a. $105.56 Answer:The net profit is $ b. $95.68 Answer: The net profit is $ Place your answers in dollars and cents. Negative answers should use the minus sign. For example, the answer of minus two dollars and twenty cents would be placed as -2.20.
You would like to be holding a protective put position on the stock of XYZ Company to lock in a guaranteed minimum value of $210 at year-end. XYZ currently sells for $210. Over the next year, the stock price will either increase by 10% or decrease by 10%. The T-bill rate is 4%. Unfortunately, no put options are traded on XYZ Company. Required: a. How much would it cost to purchase if the desired put option were traded? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Cost to purchase b. What would be the cost of the protective put portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Cost of the protective put portfolio
You would like to be holding a protective put position on the stock of XYZ Company to lock in a guaranteed minimum value of $240 at year-end. XYZ currently sells for $240. Over the next year, the stock price will either increase by 7% or decrease by 7%. The T-bill rate is 3%. Unfortunately, no put options are traded on XYZ Company. Required: a. How much would it cost to purchase if the desired put option were traded? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What would be the cost of the protective put portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
You would like to be holding a protective put position on the stock of XYZ Company to lock in a guaranteed minimum value of $210 at year-end. XYZ currently sells for $210. Over the next year, the stock price will either increase by 10% or decrease by 10%. The T-bill rate is 4%. Unfortunately, no put options are traded on XYZ Company. Required: a. How much would it cost to purchase if the desired put option were traded? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What would be the cost of the protective put portfolio?
Both a call and a put currently are traded on stock XYZ; both have strike prices of $49 and expirations of six months. Required: a. What will be the profit/loss to an investor who buys the call for $4.25 in the following scenarios for stock prices in six months? (Loss amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) b. What will be the profit/loss in each scenario to an investor who buys the put for $7.10? (Loss amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)
An investor sells 10 call options with an exercise price of $35 for a price of $5.00 per each contract. If on the expiration day the underlying asset is trading at $43 per share, what is investor’s gain or loss? $50 gain $30 gain $20 loss $30 loss

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