Question

Suppose you buy one SPX call option with a strike of 2135 and write one SPX call option with a strike of 2195. What are the payoffs at maturity to this position for S&P 500 Index levels of 2050, 2100, 2150, 2200, and 2250? (A negative value should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required.)

Index level          Long call payoff Short call payoff              Total payoff

2050                                      

2100                                      

2150                                      

2200                                      

2250                                      

2.

	Strike		Calls			Puts
Close	Price	Expiration	Vol.	Last		Vol.	Last
Hendreeks
103	100	Feb	72	5.20		50	2.40
103	100	Mar	41	8.40		29	4.90
103	100	Apr	16	10.68		10	6.60
103	100	Jul	8	14.30		2	10.10

Suppose you buy 25 February 100 call option contracts. Hendreeks stock is selling for $105.50 per share on the expiration date. How much is your options investment worth? What if the stock price is $101.40 on the expiration date? (Do not round intermediate calculations.)

Answer 1

1]

long call payoff :

If stock price at expiry > strike price, payoff = stock price at expiry - strike price

If stock price at expiry < strike price, payoff = 0 (premium paid is not given, therefore assumed to be zero)

short call payoff :

If stock price at expiry < strike price, payoff = 0   (premium received is not given, therefore assumed to be zero)

If stock price at expiry > strike price, payoff = strike price - stock price at expiry

Total payoff = long cal payoff + short call payoff

2]

Worth of investment = (Stock price at expiry - strike price - premium paid)

If stock price at expiry is $105.50, worth of investment = ($105.50 - $100 - $5.20) = $0.30

If stock price at expiry is $101.40, worth of investment = ($101.40 - $100 - $5.20) = -$3.80