Assume an option contract is for 1 underlying share. A put option on IBM stock has a strike price of $122. The holder of this put option exercises the option today when the price of IBM stock is $120. This means that the holder of the put option_ buys an IBM share at the price of $125 O sells the option contract today for a price of $120 O sells an IBM share today at the price of $122 sells an IBM share today at the price of $120

Assume an option contract is for 1 underlying share. A put option on IBM stock has a strike price of $122. The holder of this put option exercises the option today when the price of IBM stock is $120. This means that the holder of the put option_ buys an IBM share at the price of $125 O sells the option contract today for a price of $120 O sells an IBM share today at the price of $122 sells an IBM share today at the price of $120

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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IBM stock is currently trading at $100 per share. An investor purchases one Put option contra on IBM with a $100 strike and at a price of $3.00 per contract. Each options contract represer an interest in 100 underlying shares of stock. For each of the following scenarios determine i 7. the option is in the money, at the money, or out of the money. Show your work. A. When the option expires, IBM is trading at $98 B. When the option expires, IBM is trading at $90 C. When the option expires, IBM is trading at $97
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.
Let's say I decide to sell 1 call option through an account, but this account will only let me do this if you I already own the stock (a “covered call”), so I buy 500 shares of Company A and then proceed to sell a call option on Company Say this short call option expires in-the-money. What does in-the-money mean in this context? What will I have to do as the seller of this call option if the option expires in-the-money? And what about if it expires out-of-the-money?
Ms. Co currently own a put option on Stock A with a strike price of P45. If the current price of Stock A is P40, then what is the in-the-money amount of the option?
Suppose that a March call option to buy a share for $50 costs $2.50 and is held until March. The holder of the option will gain if the price of the stock is above 52.50 in March. True or False?
A trader has a put option contract allowing her to sell 100 shares of a stock for a strike price of $75. What are the terms of this put contract if... the company pays a quarterly dividend of $1/share the company pays a 20% stock dividend the company declares a 2-for-5 reverse stock split For each number, fill in the blank: The option allows the trader to sell ________ shares of stock for $_______/share.
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)
This assignment repeats the work done in class using a company named Nodiv. The current share price of Nodiv stock is $50, and it pays no dividends. Thus, the 1-year forward price is 553.00, assuming the risk-free interest rate is 6%.1. Write the payoff in the table from a long futures position where you are obligated to buy at the contract price. Write the payoff in the table from a short futures position where you are obligated to sell at the contract price. Draw the payoff diagram for each position.
You have purchased a put option on ABC common stock for $2 per contract. The option has an exercise price of $56. What is your net profit on this option if stock price is S45 at expiration? Moving to another question will save this response.
You have taken a long position in a call option on IBM common stock. The option has an exercise price of $176 and IBM’s stock currently trades at $180. The option premium is $5 per contract. What is your net profit on the option if IBM’s stock price increases to $190 at expiration of the option and you exercise the option? What is your net profit if IBM’s stock price decreases to $170?
An investor makes the following three investments: (i) the purchase of a stock for £38(ii) the purchase of a put option for £0.50 with a strike price of £35 and (iii) the sale ofa call option (ie. writing a call option) for £0.50 with a strike price of £40 .(a) What is the intrinsic value and the time value of the put option.(b) What is the maximum profit and loss for this position? help me with part (b) please.
Previously, you purchased a European put option on Parlicoot Inc shares. The option has just matured. The strike price on the option is 98.17, while the current stock price is 89.19. What is your payoff?

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