Question

In: Finance

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 increases to $83 at expiration of the option and the option holder exercises the option?

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

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 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...
On February 1st, September call option with exercise price of $55 written on Aztec stock is...
On February 1st, September call option with exercise price of $55 written on Aztec stock is sold for $4.375 per share and September put option with exercise price of $55 written on the same stock is sold for $6 per share. At the time, T-bills coming due in September are priced to yield 12%. Aztec stock is sold for $53 per share on February 1st. The time period between Feb 1st and expiration date of options is 8 months. 1....
. A stock sells for $110. A call option on the stock has an exercise price...
. A stock sells for $110. A call option on the stock has an exercise price of $105 and expires in 43 days. If the interest rate is 0.11 and the standard deviation of the stock’s return is 0.25. a) Calculate the call using the Black-Scholes model b) What would be the price of a put with an exercise price of $140 and the same time until expiration? c) How does an increase in the volatility and interest rate changes...
A stock sells for $110. A call option on the stock has exercise price of $105...
A stock sells for $110. A call option on the stock has exercise price of $105 and expires in 43 days. Assume that the interest rate is 0.11 and the standard deviation of the stock’s return is 0.25. What is the call price according to the black-Scholes model?
A stock sells for $110.A call option on the stock has an exercise price of $105...
A stock sells for $110.A call option on the stock has an exercise price of $105 and expires in 43 days.Assume that the interest rate is 0.11 and the standard deviation of the stock's return is 0.25 Required: What is the call price according to the Black Scholes model?
A call option has an exercise price of $30. The stock price is currently $27 and...
A call option has an exercise price of $30. The stock price is currently $27 and the appropriate interest rate is 6%. The option expires in exactly one year and the sigma (The return variability of underlying asset expressed as a decimal) is 0.50 or 50%. At expiration the stock underlying the option is selling for $34.00. What do you do? What is your loss or gain? Group of answer choices A. Let the option expire unexercised since the $4.00...
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.
Call Option You have taken a long position in a call option on UBR common stock....
Call Option You have taken a long position in a call option on UBR common stock. The option has an exercise price of $142 and IBM’s stock currently trades at $145. The option premium is $6 per contract. a. What is your net profit on the option if UBR’s stock price increases to $150 at expiration of the option and you exercise the option? b. How much of the option premium you paid is due to intrinsic value and how...
An exotic option, with exercise price of £8.50, was written on a stock whose price at...
An exotic option, with exercise price of £8.50, was written on a stock whose price at opening of the contract was £9. When the option expired the stock price was £7. The stock price fell below the value of £6.50 during the option’s life and the option paid off £1.50 at maturity. Which of the following best describes the option? Down-and-in-put Up-and-input Down-and-outcall Gapput
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT