Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Textbook Question
Chapter 20, Problem 3P
Below is an option quote on IBM from the CBOE Web site showing options expiring in October and November 2015.
- a. Which option contract had the most trades on that day?
- b. Which option contract is being held the most overall?
- c. Suppose you purchase one option with symbol IBM 1516J150. How much will you need to pay your broker for the option (ignoring commissions)?
- d. Explain why the last sale price is not always between the bid and ask prices.
- e. Suppose you sell one option with symbol IBM1516V 150. How much will you receive for the option (ignoring commissions)?
- f. The calls with which strike prices are currently in-the-money? Which puts are in-the money?
- g. What is the difference between the option with symboiiBM1 516J140 and the option with symbol IBM1506K140?
- h. On what date does the option with symbol IBM1516V140 expire? In what range must IBM’s stock price be at expiration for this option to be valuable?
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Students have asked these similar questions
The database is mentioned in the attachment:Ques) Draw a profit diagram for an investor in a call option with an exercise price of 64 that expires in March and explain the diagram. Undertake the same analysis for the writer of the call. Comment on the contention that options are a zero sum game for the writer and investor in options.
The following table shows the options quotation in U.S. dollars for Big Walnut Nut Company for June 30 of this year.
Option
Closing Price
Strike Price
Calls–Last Quote September
Puts–Last Quote September
1
$43.00
$47.00
$2.00
$2.20
2
$43.00
$41.00
$3.00
$1.20
3
$43.00
$49.00
$1.60
$2.60
If you could exercise the options listed only on the expiration date (the third Friday of September), then these options would be ____ options.
Assuming that the options listed are American options, on June 30, which of the call options for Big Walnut Nut Company listed in the table is in-the-money?
Option 2
Option 1
Option 3
A trader buys a six-month European call option and sells a six-month European put option. The options have the same underlying asset and the same strike price K. Can you identify a forward contract that has the same payoff as the trader’s combined options position? Under what circumstances does the price of the call equal the price of the put? (HINT: In answering these questions you may find it helpful to draw charts of the payoffs or profits of the two positions.)
Chapter 20 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 20.1 - What is the difference between an American option...Ch. 20.1 - Does the holder of an option have to exercise it?Ch. 20.1 - Prob. 3CCCh. 20.2 - What is a straddle?Ch. 20.2 - Explain how you can use put options to create...Ch. 20.3 - Explain put-call parity.Ch. 20.3 - If a put option trades at a higher price from the...Ch. 20.4 - What is the intrinsic value of an option?Ch. 20.4 - Can a European option with a later exercise date...Ch. 20.4 - How does the volatility of a stock affect the...
Ch. 20.5 - Is it ever optimal to exercise an American call on...Ch. 20.5 - When might it be optimal to exercise an American...Ch. 20.5 - Prob. 3CCCh. 20.6 - Explain how equity can be viewed as a call option...Ch. 20.6 - Explain how debt can be viewed as an option...Ch. 20 - Explain the meanings of the following financial...Ch. 20 - What is the difference between a European option...Ch. 20 - Below is an option quote on IBM from the CBOE Web...Ch. 20 - Prob. 4PCh. 20 - Prob. 5PCh. 20 - You own a call option on Intuit stock with a...Ch. 20 - Assume that you have shorted the call option in...Ch. 20 - You own a put option on Ford stock with a strike...Ch. 20 - Assume that you have shorted the put option in...Ch. 20 - What position has more downside exposure: a short...Ch. 20 - Consider the October 2015 IBM call and put options...Ch. 20 - You are long both a call and a put on the same...Ch. 20 - You are long two calls on the same share of stock...Ch. 20 - A forward contract is a contract to purchase an...Ch. 20 - You own a share of Costco stock. You are worried...Ch. 20 - Dynamic Energy Systems stock is currently trading...Ch. 20 - You happen to be checking the newspaper and notice...Ch. 20 - In mid-February 2016, European-style options on...Ch. 20 - Suppose Amazon stock is trading for 500 per share,...Ch. 20 - Consider the data for IBM options in Problem 3....Ch. 20 - You are watching the option quotes for your...Ch. 20 - Explain why an American call option on a...Ch. 20 - Consider an American put option on XAL stock with...Ch. 20 - The stock of Harford Inc. is about to pay a 0.30...Ch. 20 - Suppose the SP 500 is at 900, and a one-year...Ch. 20 - Suppose the SP 500 is at 900, and it will pay a...Ch. 20 - Prob. 29PCh. 20 - Suppose that in July 2009, Google were to issue 96...
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