Assume you buy 20 put options at a price of $5 each. The stock is currently priced at $46 and the strike price of the options is $45. If the final price at maturity of the option is $38, what is your profit or loss? (write profit as a positive number and loss as a negative number)

Assume you buy 20 put options at a price of $5 each. The stock is currently priced at $46 and the strike price of the options is $45. If the final price at maturity of the option is $38, what is your profit or loss? (write profit as a positive number and loss as a negative number)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 1P

See similar textbooks

Related questions

Q: What is the value of a call option if the underlying stock price is $81, the strike price is $90,…

A: Given Information: Stock price is $81 Strike price is $90 Expiration date in 60 days Volatility is…

Q: A call option with X = $50 on a stock currently priced at S = $55 is selling for $10. Using a…

A: The calculation of the call option price is as follows:

Q: Assume that you have an American call option expiring next year with exercise price of $40 on a…

A: The stock is the capital of the company that is issued by the company in order to obtain capital for…

Q: A) What is the price of a $30 strike put? Assume S = $28.50, σ = 0.32, r = 0.04, the stock pays a…

A: S = $28.50 σ = 0.32 r = 0.04 Dividend= 1.0% Option expiry period= 110 days Price of a $30 strike…

Q: You own a call option on Intuit stock with a strike price of $45. When you purchased the option, it…

A: Hi, since you have posted a question with multiple sub-pats we will answer only the first three, as…

Q: Consider the binomial model for an American call and put on a stock that pays no dividends. The…

A: European call option used to give an owner the right for acquiring an underlying security at an…

Q: An investor purchases a stock for $38 and a put for $.50 with a strike price of $35. The investor…

A: The calculation of the maximum profit is as follows: Hence, the maximum profit for this position is…

Q: ock is currently priced at $74 and will move up by a factor of 1.20 or down by a factor of .80 over…

A: Value of an option is the price at which the option contract is trading in the derivative market. It…

Q: A collar is established by buying a share for 50, buying a 6-month put option with exercise price…

A: Part (1): Calculation of gain or loss on the collar: Answer: Gain on the collar is $0.25 Given…

Q: The stock of Bedrock Solutions is currently trading at $20.00 per share. The 1-month put option with…

A: Time value of put is the price at which due to current situation of market.

Q: Consider a bearish option strategy of buying one $50 strike put for $7, selling two $42 strike puts…

A: Options are a kind of financial derivative that provides its holder the right to either buy or sell…

Q: Suppose a trader buys a stock at $70, buys a put option on the same stock with strike X at a price…

A: In trader have long position on stock and long positions on put. Traders make profit on long…

Q: DEP stock is currently at $100 and it is expected to either go up or down by 10%. A call option was…

A: 1. DEP STOCK Current market price = $100 Growth rate = 10% Risk free rate = 4.5% Intrinsic value =…

Q: A stock with a current price of $43 will either move up by a factor of 1.20 or down by a factor of…

A: The current value of the call option can be computed using the Present worth of expected cash flow…

Q: The current price of a stock is $35, and the annual risk-free rate is 3%. A call option with a…

A: Put option is defined as the contract which provide the owner the right to sell but not the…

Q: uppose you bought stock XYZ December RM8 put options for40 sen. What is the strike price? Suppose…

A: Put option gives the opportunity to sell the stock on expiration but no obligations to do that. Put…

Q: You sell a put option on a stock for $4 with a strike price of $30. The stock currently sells for…

A: Give, Premium on option $4. Strike price is $30.

Q: You are looking at the purchase of a put option. The stock is selling for $50. The exercise price is…

A: The question is to find pay off from put option position . Put option derivative contracts provides…

Q: You bought a $50 strike call option on a stock XYZ for $8.20 and then sold/wrote a $65 call option…

A: In this question we need to calculate the amount we made from buying call option and selling call…

Q: Suppose an investor purchases a 3-month call option and a 3-month put option on ABC stock. The the…

A: The options gives the opportunity to buy or sell the stock on expiration by payment of premium but…

Q: You have purchased a put option on ABC common stock for $3 per contact. The option has an exercise…

A: Given: Put option value = $3 Exercise price = $57 Stock price = $45…

Q: The value of an option is $6.24, its delta is 0.5, and the price for the underlying stock is $82.…

A: Delta of an Option helps in determining the change in value of an option due to change in price of…

Q: A) What is the price of a $30 strike put? Assume S = $28.50, σ = 0.32, r = 0.04, the stock pays a…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: You own a call option on Intuit stock with a strike price of $39. When you purchased the option, it…

A: Data given: Strike price = $39 Cost of option( premium paid) = $7…

Q: 1. You buy a call option on a stock for $7 with a strike price of $60. The stock currently sells for…

A: For calculating profit or loss on options, we have to compute selling price with strike price.…

Q: the stock will be worth $25. | What is the present discounted value of the call option? | What would…

A: A call option gives the holder of the option a right, but not an obligation to buy stocks at a…

Q: Suppose that call options on ExxonMobil stock with time to expiration 3 months and strike price $90…

A: The question is based on the concept of valuation of call option by Black & Scholes model and…

Q: Suppose that a June call option to buy a share for $65 costs $3.5 and is held until June. Under…

A: 1.the holder of a call option will make profit when the price of the share of will be greater than…

Q: You have shorted a put option on Ford stock with a strike price of $13. When you sold (wrote) the…

A: Here, Exercise Price is $13 Put Premium Received is $5 Investor is writing a put:

Q: The stock price of BAC is currently $150 and a put option with strike price of $150 is $10. A trader…

A: Here, Current Price is $150 Strike Price is $150 Premium is $10 Strategies:- 1. 300 Shares of BAC 2.…

Q: You shorted a call option on Intuit stock with a strike price of $34. When you sold (wrote) the…

A: Strike Price of $34 Premium received is $6 Time to expiry is 3 months To Find: Payoff profits

Q: You shorted a call option on Intuit stock with a strike price of $34. When you sold (wrote) the…

Q: You have taken a long position in a call option on IBM common stock. The option has an exercise…

A: The purchase cost of the Call option at an exercise price of $176 = $5 If IBM’s stock price…

Q: The exercise price on one of Flanagan Company’s call options is $15, itsexercise value is $22, and…

A: Call option gives right to buy the underlying asset at prefixed price on future date. For the writer…

Q: You bought a $50 strike call option on a stock XYZ for $8.20 and then sold/wrote a $65 call option…

A: A premium is paid by the buyer of the option to have the right but not the obligation to exercise…

Q: You bought a $50 strike call option on a stock XYZ for $8.20 and then sold/wrote a $65 call option…

A: Call Option is exercised only if stock price on maturity is more than the strike price of the call.…

Q: A collar is established by buying a share of stock for $50, buying a 6-month put option with…

A: a. Calculation of the gain on the collar is as follows: Hence, the gain on the collar from the…

Q: You own a put option on Ford stock with a strike price of $9. When you bought the put, its cost to…

A: Put Option: A put option gives the holder the right, but not an obligation to sell the underlying…

Q: A call option is the right to buy stock at $50 a share. Currently the option has six months to…

A: Black scholes model uses the below formula: St = Spot price K = strike price r= interest rate t =…

Q: You have purchased a put option on Pfizer common stock. The option has an exercise price of $54 and…

A: A put option is a contract where it gives an owner the right to sell the security.

Q: You own a call option on Intuit stock with a strike price of $39. When you purchased the option, it…

A: Explanation : Under Option Market in Foreign Exchange Investor will earn the fix amount of Loss But…

Q: You have purchased a put option on ABC common stock for $2 per contract. The option has an exercise…

A: Put option gives the investor an option to sell the stock at a given exercise price. Put option…

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

In 1973, Fischer Black and Myron Scholes developed the Black-Scholes option pricing model (OPM). (1) What assumptions underlie the OPM? (2) Write out the three equations that constitute the model. (3) According to the OPM, what is the value of a call option with the following characteristics? Stock price = 27.00 Strike price = 25.00 Time to expiration = 6 months = 0.5 years Risk-free rate = 6.0% Stock return standard deviation = 0.49
Suppose that you sell for 8 dollars a call option with a strike price of 45 dollars, and you sell for 13 dollars each two put options with a strike price of 55 dollars. What is the minimum stock price at the exercise date that will result in you breaking even? Don't use Excel and chatgpt
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)
Suppose you purchase 20 call contracts on SAMSONG Co. stock. The strike price is $120, and the premium is $8. If the stock is selling for $140, $128, $120 per share at expiration, what are your call options worth? What is your net profit?
If a particular stock does not pay dividends and is currently priced at $24 per share, what should be the price of a call option with a maturity of one year and a strike price of $24.5 if put options with the same features currently cost $2? Assume a risk-free rate of 2%. (use 5 decimal places)
A stock price is $30. An investor buys one call option contract on the stock with a strike price of $28 and sells a call option contract on the stock with a strike price of $27. The market prices of the options are $2 and $1.7, respectively. The options have the same maturity date. Describe the investor’s position and the possible gain/loss he will get (taking into account the initial investment). Make a graph of your gain/loss.
Suppose you purchase eight call contracts on Macron Technology stock. The strike price is $60 and the premium is $3. If, at expiration, the stock is selling for $64 per share, what are your call options worth? What is your net profit?
You are long both a call and a put on the same share of stock with the same exercise date. The exercise price of the call is $40 and the exercise price of the put is $45. What is the minimum payoff from this option portfolio at the expiration date? (in dollars without the dollar sign, use two decimal places).
A non – dividend – paying stock with a current price of $52, the strike price is $50, the risk free interest rate is 12% pa, the volatility is 30% pa, and the time to maturity is 3 months? a) Calculate the price of a call option on this stock b) What is the price of a put option price on this stock? c) Is the put-call parity of these options hold?
A stock is currently selling for $39. In one period, the stock will move up by a factor of 1.29 or down by a factor of .53. A call option with a strike price of $50 is available. If the risk-free rate of interest is 2.5 percent for this period, what is the value of the call option?
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 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?