Question

In: Finance

You have purchased a put option on Pfizer common stock. The option has an exercise price...

  1. You have purchased a put option on Pfizer common stock. The option has an exercise price of $27 and Pfizer stock currently trades at $29. The option premium is $0.50 per contract.
  1. What is the intrinsic value of the option?
  2. What is the time value of the option?
  3. What is your net profit on the option if Pfizer’s stock price does not change over the life of the option?
  4. What is your net profit on the option if Pfizer’s stock price falls to $23 and you exercise the option?

Solutions

Expert Solution

jeff jeffy answered 4 months ago
Next > < Previous

Related Solutions

You have purchased a put option on Pfizer common stock. The option has an exercise price...
You have purchased a put option on Pfizer common stock. The option has an exercise price of $52 and Pfizer’s stock currently trades at $54. The option premium is $0.70 per contract. a. What is your net profit on the option if Pfizer’s stock price does not change over the life of the option? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))   Net profit $  per share b. What is your...
Q5 you have purchased a put option on Pfizer common stock. The option has an exercise...
Q5 you have purchased a put option on Pfizer common stock. The option has an exercise price of $39 and Pfizer’s stock currently trades at $41. The option premium is $0.60 per contract. a. What is your net profit on the option if Pfizer’s stock price does not change over the life of the option? b. What is your net profit on the option if Pfizer’s stock price falls to $35 and you exercise the option? (For all requirements, negative...
You have written a call option on Walmart common stock. The option has an exercise price...
You have written a call option on Walmart common stock. The option has an exercise price of $88, and Walmart’s stock currently trades at $86. The option premium is $1.30 per contract. a. How much of the option premium is due to intrinsic value versus time value? b. What is your net profit if Walmart’s stock price decreases to $84 and stays there until the option expires? c. What is your net profit on the option if Walmart’s stock price...
You have written a call option on Walmart common stock. The option has an exercise price...
You have written a call option on Walmart common stock. The option has an exercise price of $77, and Walmart’s stock currently trades at $75. The option premium is $1.40 per contract. a. How much of the option premium is due to intrinsic value versus time value? b. What is your net profit if Walmart’s stock price decreases to $73 and stays there until the option expires? c. What is your net profit on the option if Walmart’s stock price...
A stock`s current price is $30. A put option written on this stock has the exercise...
A stock`s current price is $30. A put option written on this stock has the exercise price at $32. The time to maturity of this put option is 2 years, and the risk-free rate is 5% per year. If currently, this put option is selling at $2.1, please find the implied volatility of the stock.
you have purchased 10bcall option contracts on CBA stock with an exercise price of $58.50 when...
you have purchased 10bcall option contracts on CBA stock with an exercise price of $58.50 when the option was quoted at $2.50. the option expires today when the value of CBA stock is at $62.60. what is the net profit or loss on this investment, ignoring all teasing costs and taxes?
You have purchased a put option in a bond at a strike price of Rs 1000....
You have purchased a put option in a bond at a strike price of Rs 1000. Later, the market price of the bond settles at Rs 1100. What is the best course of option for you? Select one: a. You exercise your option: by buying the bond @ Rs 1000 b. You exercise your option: by selling the bond @ Rs 1000 c. None of these d. Do not exercise your option
A European call option and put option on a stock both have a strike price of...
A European call option and put option on a stock both have a strike price of $21 and an expiration date in 4 months. The call sells for $2 and the put sells for $1.5. The risk-free rate is 10% per annum for all maturities, and the current stock price is $20. The next dividend is expected in 6 months with the value of $1 per share. (a) describe the meaning of “put-call parity”. [2 marks] (b) Check whether the...
A European call option and put option on a stock both have a strike price of...
A European call option and put option on a stock both have a strike price of $21 and an expiration date in 4 months. The call sells for $2 and the put sells for $1.5. The risk-free rate is 10% per annum for all maturities, and the current stock price is $20. The next dividend is expected in 6 months with the value of $1 per share. (a) In your own words, describe the meaning of “put-call parity”. (b) Check...
A European call option and put option on a stock both have a strike price of...
A European call option and put option on a stock both have a strike price of $25 and an expiration date in four months. Both sell for $4. The risk-free interest rate is 6% per annum, the current stock price is $23, and a $1 dividend is expected in one month. Identify the arbitrage opportunity open to a trader.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT