Netflix trades at $298.50.Netflix January 10, 2020 call option with a strike price of $310 has a premium of $4.30. Is this option in the money or out of the money? Explain.A Netflix February 24 call option with a strike price of $310 (same as above) has a premium of $11.80. How do you explain the significant difference in premium between the two options?You own Netflix and are worried the stock mat react negatively to bad news. You do not want to sell the stock, but you do want to protect a profit you have realized. What option strategy is best suited for you? Explain the option you would buy or sell and be specific with a strike price.Netflix is due to report earnings on Tuesday. Their earnings have been either very good or very bad, and you are not sure what they may report, but why you do know is the stock trades sharply higher or lower depending on the report. You do not own the stock, but want to trade the news of Netflix earnings. What option strategy is best for you. Explain the specific mechanics, the cost of the strategy and what is needed to break even. Use the option table below to base your answer on:CALL  STRIKEPREMIUMEXPIRATION$285.00$14.5012/20/2019$300.00$3.8012/20/2019$320.00$0.2512/20/2019$395.00$12.481/17/2020$310.00$5.551/17/2020   PUT  STRIKEPREMIUMEXPIRATION$285.00$1.1012/20/2019$300.00$5.3612/20/2019$320.00$21.9112/20/2019$295.00$8.651/17/2020$310.00$16.801/17/2020

Question
Asked Dec 17, 2019
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Netflix trades at $298.50.

Netflix January 10, 2020 call option with a strike price of $310 has a premium of $4.30. Is this option in the money or out of the money? Explain.

A Netflix February 24 call option with a strike price of $310 (same as above) has a premium of $11.80. How do you explain the significant difference in premium between the two options?

You own Netflix and are worried the stock mat react negatively to bad news. You do not want to sell the stock, but you do want to protect a profit you have realized. What option strategy is best suited for you? Explain the option you would buy or sell and be specific with a strike price.

Netflix is due to report earnings on Tuesday. Their earnings have been either very good or very bad, and you are not sure what they may report, but why you do know is the stock trades sharply higher or lower depending on the report. You do not own the stock, but want to trade the news of Netflix earnings. What option strategy is best for you. Explain the specific mechanics, the cost of the strategy and what is needed to break even. Use the option table below to base your answer on:

CALL    
STRIKE PREMIUM EXPIRATION
$285.00 $14.50 12/20/2019
$300.00 $3.80 12/20/2019
$320.00 $0.25 12/20/2019
$395.00 $12.48 1/17/2020
$310.00 $5.55 1/17/2020
     
PUT    
STRIKE PREMIUM EXPIRATION
$285.00 $1.10 12/20/2019
$300.00 $5.36 12/20/2019
$320.00 $21.91 12/20/2019
$295.00 $8.65 1/17/2020
$310.00 $16.80 1/17/2020
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Expert Answer

Step 1

Joint Cost:

 

Joint costing is a cost accounting term, which is referred to common costs incurred in purchasing or in the process of producing multiple products.

Step 2

Calculate the weights for the two products:

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Product Sale value at split off point $550,000 Weight $550, 000 S680,000, $130,000 S680, 000) XX-1 0.80882 $130,000 XX-2 0.19118 Total $680.000

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Step 3

Calculate the amount of the joint costs that was al...

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(Total joint cost xWeight for Product XX-1) Joint cost allocated to Product XX-1 = = $510,000x 0.80882 = $412,500

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