Basic Option Strategies Profit ComputationAssume the below prices for calls and puts: CallPutStrikeJulAugOctJulAugOct1652.75.258.12.44.756.751700.83.2565.757.59 Buy one August 170 put contract. Hold it until expiration. Identify the breakeven stock price at expiration. What is the profit/loss if ST=190?Buy one October 165 call contract. Hold it until the options expire. Identify the breakeven stock price at expiration. What is the Maximum possible loss from the transaction? What is the profit/loss if ST=185Buy 100 shares of stocks and buy one August 165 put contract. Hold the position until expiration. Determine the breakeven stock price at expiration, the maximum profit and the maximum loss. What is the profit/loss if ST=150.Buy 100 shares of stock and write one October 170 call contract. Hold the position until expiration. Determine the breakeven stock price at expiration, the maximum profit and the maximum loss. What is the profit/loss if ST=185.

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Fundamentals of Financial Management (MindTap Course List)

14th Edition

ISBN:9781285867977

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter18: Derivatives And Risk Management

Section18.A: Valuation Of Put Options

Problem 1P

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Basic Option Strategies Profit Computation

Assume the below prices for calls and puts:

	Call	Put
Strike	Jul	Aug	Oct	Jul	Aug	Oct
165	2.7	5.25	8.1	2.4	4.75	6.75
170	0.8	3.25	6	5.75	7.5	9

Buy one August 170 put contract. Hold it until expiration. Identify the breakeven stock price at expiration. What is the profit/loss if ST=190?
Buy one October 165 call contract. Hold it until the options expire. Identify the breakeven stock price at expiration. What is the Maximum possible loss from the transaction? What is the profit/loss if ST=185
Buy 100 shares of stocks and buy one August 165 put contract. Hold the position until expiration. Determine the breakeven stock price at expiration, the maximum profit and the maximum loss. What is the profit/loss if ST=150.
Buy 100 shares of stock and write one October 170 call contract. Hold the position until expiration. Determine the breakeven stock price at expiration, the maximum profit and the maximum loss. What is the profit/loss if ST=185.

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