Question

-European call and put options with 3 months of expiration exist with strike price $30 on the same underlying stock. The call is priced at $3.5, the put is priced at $1.25, while the underlying is currently selling for $28.5.

a) What is the net profit for the buyer of the call if the stock price at expiration is $36?

b) What is the net profit for the seller of the call if the stock price at expiration is $38?

c) What is the net profit for the buyer of the put if the stock price at expiration is $24?

d) What is the net profit for the seller of the put if the stock price at expiration is $22?

e) What is the net profit if one buys both the call and the put, and at expiration the stock price is $39?

f) What is the net profit if one buys both the call and the put, and at expiration the stock price is $22.5?

Answer 1

European Call and Put option with 3 months expiration strike price							$30
				Call price			$3.50
				Put price			$1.25
				Underlying currently selling			$28.50
	a) What is the net profit for the buyer of the call if the stock price at expiration is $36?
			Underlying stock price at expiration :				$36
			Current selling $28.50
			At the time of expiration profit: ($36-$28.50)- Call price
						$4.00
	b) b) What is the net profit for the seller of the call if the stock price at expiration is $38?
			Seller of the call when stock price at expiration is $38
				Net profit		($28.50-$38)+ Call price
					Loss	-$9.50
					Net profit	-$6.00
	c)c) What is the net profit for the buyer of the put if the stock price at expiration is $24?
				Put stock price expiration			$24
				Buyer of Put option with strike price is            $30
				Putprice			$1.25
				Net profit			($30-$24)-$1.25
							$4.75
	d) What is the net profit for the seller of the put if the stock price at expiration is $22?
			Put stock price expiration			$22
			Buyer of Put option with strike price is            $30
			Currently selling				$28.50
			Putprice			$1.25
			Net profit			($22-$30)+$1.25
			Net profit			-$6.75
	e) What is the net profit if one buys both the call and the put, and at expiration the stock price is $39?
			Call price			$3.50
			Put price			$1.25
		Call Buys	Strike price $30			$39-$30-$3.50	$5.50
		Put buys	Strike price $30			$30-$39+$1.25	-$7.75
							$5.50+($7.75)
				Net profit			-$2.25
	) What is the net profit if one buys both the call and the put, and at expiration the stock price is $22.5?
			Call price			$3.50
			Put price			$1.25
		Call Buys	Strike price $30			$22.50-$30-$3.50	-$11.00
		Put buys	Strike price $30			$30-$22.50+$1.25	$8.75
							-$11.00+($8.75)
				Net profit			-$2.25