Question

In: Finance

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 much due to time value?

c. What is your net profit on the option if UBR’s stock price increases to $148?

Solutions

Expert Solution


Related Solutions

You have taken a long position in a call option on IBM common stock. The option...
You have taken a long position in a call option on IBM common stock. The option has an exercise price of $150 and IBM's stock currently trades at $153. The option premium is $5 per contract. a. How much of the option premium is due to intrinsic value versus time value? b. What is your net profit on the option if IBM’s stock price increases to $163 at expiration of the option and you exercise the option? c. What is...
You have taken a stock option position and, if the stock's price drops, you will get...
You have taken a stock option position and, if the stock's price drops, you will get a level gain no matter how far prices fall, but you could go bankrupt if the stock's price rises. You have________________________________. Multiple Choice bought a call option. bought a put option. written a call option. written a put option. written a straddle.
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...
Explain the difference between a long call option and a long futures position.
Explain the difference between a long call option and a long futures position.
a. Calculate the holding period returns for a long stock position and a long call position...
a. Calculate the holding period returns for a long stock position and a long call position if the stock price is $30, $40 and $50 on the expiration date. Assuming the stock was purchased at $40 and the call was purchased at $5.24 with exercise price of $40. b. Compare your calculation results for Part a, explain why a long position in call can provide leverage to the investor. c. If the price of SAS stock had stayed at $40...
A long position in a call option with an exercise price of $100. Assume that the call costs $10 when you purchase it.
A long position in a call option with an exercise price of $100. Assume that the call costs $10 when you purchase it.1B) If the stock price at expiration is $150, what is the likely value of the call option?1C) What is the maximum loss an investor would face on the call?
1 Draw the payoff picture at expiration for a long position in a call option that...
1 Draw the payoff picture at expiration for a long position in a call option that has a premium of $1.75 and a strike price of $40. 1a Draw the payoff picture for a short position in the call option given in Problem 2.
1) draw the payoff picture at expiration for a long position in a call option that...
1) draw the payoff picture at expiration for a long position in a call option that has a premium of $1.25 and a strike price of $50. 2) draw the payoff picture for a short position in the call option given in problem 1.
A short forward contract on an asset plus a long position in a European call option...
A short forward contract on an asset plus a long position in a European call option on the asset with a strike price equal to the forward price is equivalent to a)A short position in a call option b)A short position in a put option c)A long position in a put option d)None of the above
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT