Question

The following are option price quotations for The North West Company on July 27, 2019:

The North West Company stock market price $29.89

Expiration Date	Type of option	Exercise Price	Option Premium
August 16, 2019	Call	$30	$0.40
August 16, 2019	Put	$30	$0.5

a. What is the intrinsic value and time value for each option?

b. Calculate the breakeven share price for each option.

c. Suppose on July 27, 2019 you take the long position (buy) in one August 16, 2019 call option on The North West Company and hold your position to the expiry date. Calculate your net profit given the following stock prices (Po) $ 20, 25, 30, 35, and 40.

d. Suppose on July 27, 2019 you take the short position (sell) in one August 16, 2019 put option on The North West Company and hold your position to the expiry date. Calculate your net profit given the following stock prices (Po) $ 20, 25, 30, 35, and 40.

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

Hope this will help, please do comment if you need any further explanation. Your feedback would be appreciated.