Question
In: Finance
3. Suppose you bought a call option for $3 with an exercise price of $50 and...
3. Suppose you bought a call option for $3 with an exercise price of $50 and another call option for $2 with an exercise price of $60 per share. Draw a graph of the payout on the investment as a function of the stock price. Label the graph.
Solutions
Expert Solution
Options gives a right but not an obligation to the holder to buy or sell an asset at a certain date at a certain rate
Payoffs
Call payoff = (Spot Price - Strike Price ) (Where S>X) or Zero (Where S<X)
jeff jeffy answered 1 year agoRelated Solutions
Suppose you write a May expiration call option on Delta Airlines with exercise price $50 and...
Suppose you write a May expiration call option on Delta Airlines
with exercise price $50 and at the same time, write a Delta Airline
put option with exercise price $50. The premium of the call option
is $0.91 and the premium of the put option is $0.54. Assume Delta
Airlines will not pay any dividend before these options expire in
May.
a. Draw the payoff of this option portfolio at option expiration
as a function of Delta Airlines stock price...
You bought a call option on July 27, 2020 at the exercise price of $65. It...
You bought a call option on July 27,
2020 at the exercise price of $65. It expires on October 26, 2020.
The stock currently sells for $66., while the call option sells for
$6.
a) What is the intrinsic value of the
call? What is the time premium paid for the call?
b) What will the value of this call be
after expiration if the price of the stock is $99, $65, $99, and
$80, respectively?
c) If the price...
You bought a call option on July 27, 2020 at the exercise price of $65. It...
You bought a call option on July 27, 2020 at the exercise price
of $65. It expires on October 26, 2020. The stock currently sells
for $66., while the call option sells for $6.
a) What is the intrinsic value of the call? What is the time
premium paid for the call?
b) What will the value of this call be after expiration if the
price of the stock is $99, $65, $99, and $80, respectively?
c) If the price...
(i). You bought a call option on July 27, 2020 at the exercise price of $65....
(i). You bought a call
option on July 27, 2020 at the exercise price of $65. It expires on
October 26, 2020. The stock currently sells for $66., while the
call option sells for $6.
a) What is the intrinsic value of the
call? What is the time premium paid for the call?
b) What will the value of this call be
after expiration if the price of the stock is $99, $65, $99, and
$80, respectively?
c) If the...
(i). You bought a call option on July 27, 2020 at the exercise price of $65....
(i). You bought a call
option on July 27, 2020 at the exercise price of $65. It expires on
October 26, 2020. The stock currently sells for $66., while the
call option sells for $6.
a) What is the intrinsic value of the
call? What is the time premium paid for the call?
b) What will the value of this call be
after expiration if the price of the stock is $99, $65, $99, and
$80, respectively?
c) If the...
6 months ago you bought a $5 call option on a stock with an exercise price...
6 months ago you bought a $5 call option on a stock with an
exercise price of $60. What is the percentage return?
If the stock price at expiration of this option is $54
If the stock price at expiration of this option is $72
6 months ago you bought for $3 a put option on a stock with an
exercise price of $60, what is your return on investment?
If the stock price at expiration of this option is...
Consider a call option with a premium of $8 for which the exercise price is $50....
Consider a call option with a premium of $8 for
which the exercise price is $50. What is the
profit for a holder if the
underlying stock price at expiration is $60.00? What is the profit
for the seller?
Suppose that you buy a six-month call option on stock Y with an exercise price of...
Suppose that you buy a six-month call option on stock Y with an
exercise price of $80 and sell a six-month call option on Y with an
exercise price of $120. Draw a position diagram showing the payoffs
when the options expire. (Hint: Determine and then add up the
values of the two options given different share prices.)
Suppose that a March call option on a stock with a strike price of $50 costs...
Suppose that a March call option on a stock with a strike price
of $50 costs $2.50 and is held until March. Under what
circumstances will the option be exercised? Under what
circumstances will the holder of the option make a gain? Under what
circumstances will the seller of the option make a gain? What is
the maximal gain that the seller of the option can make? Under what
circumstances will the seller of the option make the maximal
gain?
Suppose you bought an October call option on Amazon that had a strike price of $20 with a premium of $2.
Suppose you bought an October call option on
Amazon that had a strike price of $20 with a premium of $2. At the
same time, you shorted Amazon stock at today’s
price of $15. If the price of amazon appreciates to $26 in October,
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