Question

uppose the following is the part of the WSJ listed options quotations on 12/1/2018; on that day IBN stock price was $53.

Strike	Exp.	Call	Put
50	Jan	5	1.06
50	Apr	3.50	1.25
55	Jan	6	5
60	Jan	0.50	8
60	Apr	1.50	9.50
60	Jul	2.38	10.75

Which one of the following is out of the money?

		50 Jan Call
		50 Apr Call
		55 Jan Call
		60 Jan Put

What is the exercise value, or the intrinsic (=parity) value of a Jan 50 call option?

		$1
		$2
		$3
		$4
		$5

How much time value is in Jan 50 call option?

		$1
		$2
		$3
		$4
		$5

Suppose today you buy a IBN Jan 50 call for the price listed. At expiration, IBN stock sells for $60. What is the profit per contract?

		$300
		$500
		$600
		$800
		$1200

Suppose you buy a IBN Apr 50 put for the price listed. At expiration, IBN stock sells for $45. What is your profit per contract?

		$150
		$250
		$375
		$400
		$550

Assume the call premium of $5 for IBN Jan 50 call option is right. Then the underlined price of $3.50 for Apr 50 call cannot be true. Which one of the following is a reasonable price for the option?

		$2.5
		$3
		$3.5
		$4.5
		$5.5

Assume the call premium of $5 for IBM Jan 50 call option is right. Then the underlined price of $6 for Jan 55 call cannot be true. Which one of the following is a reasonable price for the option?

		$0
		$1
		$6.5
		$7
		$7.5

ABD stock is selling for $145 and call option on ABD stock with striking price of $140 is selling for $12.5. The option expires 5 months from today. The risk-free interest rate is 8%. Based on the put-call parity for European options, calculate the value of put option with striking price of $140 and time to expiration of 5 months.

		$2.53
		$3.08
		$5.51
		$7.12
		$8.33

The current level of the S&P 500 is 1500. The dividend yield on the S&P 500 is 2%. The risk-free interest rate is 4%. The futures price for a contract on the S&P 500 due to expire 6 months from now should be __________.

		$1,500
		$1,515
		$1,525
		$1,535
		$1,545

Answer 1

1]

A call option is out-of-money if the current stock price is less than the strike price

A put option is out-of-money if the current stock price is more than the strike price

Based on this :

The 50 Jan Call and 50 Apr call are not out-of-money since the stock price is more than the strike price

The 60 Jan Put is not out-of-money since the stock price is less than the strike price

The 55 Jan Call is out-of-money since the stock price is more than the strike price

2]

Intrinsic value of call option = stock price - strike price = $53 - $50 = $3

3]

Time value = option price - intrinsic value

The call option price is $5 as per the table

Time value = $5 - $3 = $2

4]

profit on call option contract = (stock price at expiry - strike price - premium paid) * contract size  = $60 - $53 - $5 = $2

profit on call option contract = ($60 - $53 - $5) * contract size = $2 * contract size

For example, if the contract size is 200,  profit on call option contract = $2 * 300 = $600