Question

Suppose you are long 100 contracts on a 1-year 25-put option on AMZN. How much will your option position increase in value if AMZN stock price goes down by $1 (use negative number if value decreases).

Suppose you are long 100 contracts on a 1-year 25-put option on AMZN. How much will your option position increase in value if AMZN stock price goes up by $1 (use negative number if value decreases).

Suppose you are short 50 contracts on a 2-year 50-call option on TSLA. How much will your option position increase in value if TSLA stock price goes up by $3 (use negative number if value decreases).

Answer 1

PART 1- Increase in option position if stock price goes down by $1-

Net Increase in position = - (reduction in price * number of long positions held)

Net increase = - ($1 * 100 contracts )

Net Increase = - $100

PART 2- Increase in option position if stock price goes up by $1-

Net Increase in position = (Increase in price * number of long positions held)

Net increase = ($1 * 100 contracts )

Net Increase = $100

PART 3- Increase in option position if stock price goes up by $3-

Net Increase = - (increase in price * number of short positions)

Net increase = - ($3 * 50 contracts )

Net Increase = - $150

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