Question
In: Finance
1. Bluefish has a put option that trades with a strike price of $74. The put...
1. Bluefish has a put option that trades with a strike price of $74. The put option premium is $12. Determine the profit/loss on WRITING one Bluefish put option if at the option's expiration the stock price is $50.
2. Kingfish has call options trading with a strike price of
$77 and a premium of $10.
Determine the profit/loss to the buyer of the call option if at the
time of expiration the stock price is
$63.
Solutions
Expert Solution
> Formula
Profit/Loss Calculation
- Writer of put option
- Put Option = [ ( Market Price - Strike price ) + Option Premium ], if strike price > MarkePrice
- Put Option = [ 0 + Option Premium ], if strike price < Market Price | Option lapse
- Buyer of call option
- Call option = [ ( Market Price - Strike price ) - Option Premium ], if strike price < Market Price
- Put Option = [ 0 - Option Premium ], if strike price > Market Price because option lapse
> Calculation
1) Put Option seller
Since, strike price > MarkePrice
Profit/loss = [ ( Market Price - Strike price ) + Option Premium ]
= [ (50-74) + 12 ]
= -12
The loss of $ 12.
2) Call Option Buyer
Since, strike price > Market Price, thus option lapse
Profit/loss = [ 0 - Option Premium ]
= [ 0 - 10 ]
= -10
The loss of $ 10.
Hope you understand the solution.
jeff jeffy answered 1 year agoRelated Solutions
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A put option with a strike price of $65 costs $8. A put option
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A put option with a strike price of $65 costs $8. A put option with a...
A put option with a strike price of $65 costs $8. A put option
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1) How can a bull spread be created?
2) With the bull spread created above, what is the profit/loss
if the stock price is $70?
3) With the bull spread created above, when would the investor
gain a positive profit?
A call option written on CBA has a strike price of $78 and trades at $3.42....
A call option written on CBA has a strike price of $78 and
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A call option written on CBA has a strike price of $78 and trades at $3.42....
A call option written on CBA has a strike price of $78 and
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b)-$2.00 intrinsic value and $5.42 time value
c)$2.00 intrinsic value and $1.42 time value
d)zero intrinsic value and $3.42 time value
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Given the following: Call Option: strike price = $100, costs $4 Put Option: strike price =...
Given the following:
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How can a strangle be created from these 2 options? What are the
profit patterns from this? Show using excel.
1.The price of a three-month European put option on a stock with a strike price of...
1.The price of a three-month European put option on a stock with
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strike price of $60?
Select one:
a. $5.19
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c. $2.79
d. $3.19
2.For the above question, if the...
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Option Strike Price $ Call Option Price $ Put Option Price $ 45 10.00 1.00 50...
Option Strike Price $
Call Option Price $
Put Option Price $
45
10.00
1.00
50
5.00
2.00
55
1.50
3.00
60
1.00
7.50
Using the quotes from
the table above, an investor makes the following transactions:
(1) buys the stock at
$55, and
(2) writes the
December Call with a strike price of $55.
If the stock
is selling for $62 per share, when the options expire, the
profit from the trades is
closest to a:
.
Multiple Choice...
Given the following: Call Option: Strike Price = $60, expiration costs $6 Put Option: Strike Price...
Given the following:
Call Option: Strike Price = $60, expiration costs $6
Put Option: Strike Price = $60, expiration costs $4
In excel, show the profit from a straddle for this. What range
of stock prices would lead to a loss for this?
Including a graph would be helpful.
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