Question

The current price of Stock A is $305/share. You believe that the price will change in the near future, but your are not sure in which direction. To make a profit from the price change, you purchase ONE call option contract (each contract has 100 calls) and TWO put option contracts (each contract has 100 puts) at the same time. The call option and the put option have the same expiration date. The strike price of the call option is $310, and the premium is $3.10 per call. The strike price of the put option is $300, and the premium is $8.30 per put.

If the stock price increases to $307/share on the expiration date, what is the profit and payoff of your portfolio?

**Note, profit and payoff are different.**

Answer #1

Both call and put option cannot be exercised resulting in loss of premium amount.

Strike price |
Exercised or lapsed |
Payoff |
Initial Investment |
Profit |
||

1 |
Call option at $310 |
|||||

($3.10*100) | ||||||

$307 | Lapsed | 0 | $310.00 | ($310.00) | ||

2 |
Put option at $300 |
|||||

($8.30*200*2) | ||||||

$307 | Lapsed | 0 | $3,320.00 | ($3,320.00) | ||

Total Payoff |
0 |
Total Loss |
($3,630.00) | |||

The current price of Stock A is $305/share. You believe that the
price will change in the near future, but your are not sure in
which direction. To make a profit from the price change, you
purchase ONE call option contract (each contract has 100 calls) and
TWO put option contracts (each contract has 100 puts) at the same
time. The call option and the put option have the same expiration
date. The strike price of the call option is...

Suppose the current price of a share of ABC stock is $188. You
buy a call option (June 2020 expiration date and $190 strike price)
on ABC stock at a call premium of $4. If the price of ABC stock on
the expiration day is $189, the payoff and profit of your
investment on the call option will be:
A.
$1 (payoff) and $3 (profit)
B.
$1 (payoff) and $5 (profit)
C.
$1 (payoff) and -$3 (profit)
D.
$0 (payoff)...

You purchase one SDB $125 strike price call contract (equaling
100 shares) for a premium of $5. You hold the option until the
expiration date, when SDB stock sells for $123 per share. What will
be your payoff at expiry? What will be your profit/loss?
You write one SDB $120 strike price put contract (equaling 100
shares) for a premium of $4. You hold the option until the
expiration date, when SDB stock sells for $121 per share. What will...

You buy a call option and buy a put option on bond X. The strike
price of the call option is $90 and the strike price of the put
option is $105. The call option premium is $5 and the put option
premium is $2. Both options can be exercised only on their
expiration date, which happens to be the same for the call and the
put.
If the price of bond X is $100 on the expiration date, your...

XYZ Stock currently trades for $45 per share. You find the
following options matrix (prices of calls and puts) for a June 1st
expiration date (which applies for all)
40 strike call option:
$9
40 strike put option: $2
45 strike call option:
$4
45 strike put option: $4
50 strike call option:
$2
50 strike put option: $9
55 strike call option:
$1
55 strike put option: $15
You believe that XYZ will be extremely volatile in the next...

Suppose you buy a stock, buy a put option with a strike price of
$80 on the stock, and write a call option on the stock with a
strike price of $100. What is the total payoff (not profit) if the
stock price at expiration is $125?

Suppose you are an options trader. You have recently sold two
contracts of puts on a stock that is currently selling at $27.50.
The exercise price on the puts is $25.00. You also buy three
contracts of calls on the same stock that has an exercise price of
$24.00. The premium on the call is $.85 per option while the
premium on the put is $2.00 per option. If, at expiration, the
stock price is $28.31, what is your combined...

The common stock of XYZ Corporation has been trading in a narrow
price range for the past a few months, and you are convinced it is
going to break far out of that range in the next 1 year. You do not
know whether it will go up or down, however. The current price of
the stock is $100 per share, and the price of a 1-year call option
at an exercise price of $100 is $10 and the put...

1. You buy a put option with strike price of $25. Currently, the
market value of the underlying asset is $30. The put option premium
is $3.25. Assume that the contract is for 150 units of the
underlying asset. Assume the interest rate is 0%. a. What is the
intrinsic value of the put option? b. What is the time value of the
put option? c. What is your net cash flow if the market value of
the options’ underlying...

You currently own one share in IBM. The current share
price (stock price) is 50. You begin to notice mixed signals about
IBM’s future and you fear that stock prices might fall. You want to
hedge against this possibility while being able to profit from
further share price increases. Call options for 1 share in IBM and
a strike price of 50 are trading on the exchange for a premium of
5. Put options for 1 share in IBM and...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 6 minutes ago

asked 18 minutes ago

asked 22 minutes ago

asked 24 minutes ago

asked 24 minutes ago

asked 28 minutes ago

asked 31 minutes ago

asked 31 minutes ago

asked 41 minutes ago

asked 41 minutes ago

asked 46 minutes ago

asked 46 minutes ago