In: Finance
The following table lists prices of Alphabet options in December 2015 when Alphabet stock was selling for $750.
Expiration Date | Exercise Price | Call Price | Put Price | ||||||
January 2017 | $ | 700 | $ | 105.11 | $ | 63.54 | |||
750 | 81.80 | 76.50 | |||||||
800 | 61.10 | 106.00 | |||||||
Suppose that by January 2017, the price of Alphabet could either rise from its December 2015 level to $750 × 1.24 = $930.00 or fall to $750/1.24 = $604.84.
a. What would be your percentage return on a January expiration call option with an exercise price of $750 if the stock price rose? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)
|
b. What would be your percentage return if the stock price fell?
|
c. Which is riskier: the stock or the option?