Question

Question 15 Below is information on Lothbrok's exchange traded options: Lothbrok's stock trades at $6.40 Lothbrok...

Question 15

Below is information on Lothbrok's exchange traded options: Lothbrok's stock trades at $6.40

Lothbrok Call and Put options

Option

Expiry

Last Price

Vol.

Strike

Call

Jun 2020

2.90

10

4.00

Call

Sep 2020

0.45

40

7.00

Put

Sep 2020

2.35

15

8.00

Put

Dec 2020

6.85

-

11.00

Which options (if any) are out of the money? Which options (if any) are in the money? No calculations required. No explanations required.

Question 16

Based on information provided in question 15, calculate the time value of the Jun 2020 call option?

Question 17

Based on information provided in question 15, calculate the intrinsic value (exercise value) of the Sep 2020 put option?

Question 18

Refer to information provided in question 15. You purchased one Sep 2020 put contract today at $2.35. Two months later the stock trades at $7.80 and the premium on the put is $0.10. Is this put contract worth exercising? Briefly explain. No calculations required.

Question 19

Refer to information provided in question 15. You purchased ten Jun 2020 call option contracts today for a premium of $2.75 and you sold them on the expiry date (Hint: we did not forget to give you the selling price). Calculate your total profit (or loss) if the stock was trading at $7.20 at expiry.

Homework Answers

Answer #1

Solution

15

Option Expiry Strike CMP of Stock ITM/OTM
Call June 4 6.4 In the money
Call Sept 7 6.4 Out of money
Put Sept 8 6.4 In the money
Put Dec 11 6.4 In the money

16

Option Expiry Strike (A) Price of Call (B) CMP of Stock = C Interinsic Value (C-A) = D Time Value B-D
Call June 4 2.9 6.4 2.4 0.5

17

Option Expiry Strike (A) Price of Put (B) CMP of Stock C Interinsic Value (A-C)
Put Sept 8 2.35 6.4 1.6

18

Yes the Put option is worth excercising

We will get a payoff from put option of (8-7.8) = 0.20

which is more than the current premium of 0,10

19

Strike price of the call option is 4

Current price of the stock is 7.2

We will ger a payoff of (7.2 - 4) = 3.2 from this call option

Premium paid on 10 calls (2.75*10) 27.5
Payoff from 10 calls (3.2*10) 32
Profit (32-27.5) 4.5
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Below is information on exchange traded options: stock trades at $6.40 Call and Put options Option...
Below is information on exchange traded options: stock trades at $6.40 Call and Put options Option Expiry Last Price Vol. Strike Call Jun 2020 2.90 10 4.00 Call Sep 2020 0.45 40 7.00 Put Sep 2020 2.35 15 8.00 Put Dec 2020 6.85 - 11.00 1) Which options (if any) are out of the money? Which options (if any) are in the money? No calculations required. No explanations required. 2) Based on information provided in question 1, calculate the time...
XYZ Stock currently trades for $45 per share. You find the following options matrix (prices of...
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 the underlying stock is priced at $23.5, you perform the following 4 options trades: Buy...
-Suppose the underlying stock is priced at $23.5, you perform the following 4 options trades: Buy a call option with strike price of 27.5 at $1.5 Sell a call option with strike price of 25 at $2 Buy a put option with strike price of 20 at $1.5 Sell a put option with strike price of 22.5 at $1.5 Draw the net payoff diagram of the strategy and explain in what direction of the market this strategy will be profitable?
Use the following information to answer the next two questions. A stock currently trades for $110...
Use the following information to answer the next two questions. A stock currently trades for $110 per share. Call options on the stock are available with a strike price of $115. The options expire in 20 days. The annual risk free rate is 4% and the expected standard deviation is 0.40. Find the value of a call option using the Black-Scholes option pricing model (Assume 365 days per year) Use the Black-Scholes option pricing model to find the value of...
The following is a compilation of the prices of KOSPI200 stock futures and options with a...
The following is a compilation of the prices of KOSPI200 stock futures and options with a remaining maturity of one month. Answer the following question: (The unit of gift and option prices in the table is the point. In addition, one point in the main stock futures and options markets on the exchange is calculated at $250,000.) Stock index futures 262.5 Stock index option Exercise Price Call Premium Put Premium 260 13.7 7.4 265 9.5 11.9 270 6.5 15.3 (1)...
1. Tucker Inc. common stock currently trades for $90/share. 6-month European put options on the stock...
1. Tucker Inc. common stock currently trades for $90/share. 6-month European put options on the stock have an exercise price and premium of $93 and $4, respectively. The annual risk free rate is 2%. What should be the value of a 6-month European call option on the stock with an exercise price of $93 according to put-call parity? Round intermediate steps to four decimals and your final answer to two decimals. a. 7.90 b. 0.065 c. 1.93 d. 2.84 e....
Suppose the effective annual interest rate is 9% and Freeman Company’s stock currently trades for $91...
Suppose the effective annual interest rate is 9% and Freeman Company’s stock currently trades for $91 per share. Suppose the premium for a 1-year $85-strike call option on the stock is $22.14, and the premium for a $85-strike put is $9.12. What is the profit earned on a long $85-strike straddle if Freeman’s stock is worth $87.55 when the options expire? (You may assume the stock pays no dividends over the next year.)
1 A Suppose the price of a share of Netflix (NFLX) on April 22, 2020 is...
1 A Suppose the price of a share of Netflix (NFLX) on April 22, 2020 is $421. A May 2020 call option on NFLX stock has a premium of $20 and an exercise price of $425. Ignoring commissions, the holder of the call option will earn a profit if the price of the share       A.       increases to $448.       B.       decreases to $403.       C.       increases to $442.       D.       decreases to $400. E.        both A and C...
Apple currently trades at $433. 1.You can buy a 3-month put option on Apple stock with...
Apple currently trades at $433. 1.You can buy a 3-month put option on Apple stock with a strike price of $428 for $24.8. How much do you have to pay to establish a protective put position for a single unit? 2.In reality, you cannot buy a single option, only an option contract. According to the CBOE website, how many shares of the underlying stock are covered by 1 option contract for equity options? 3.From now on, assume you bought 1...
(4 pts) ABC is trading at $31.10.  Put options with a strike price of $30.00 and a...
(4 pts) ABC is trading at $31.10.  Put options with a strike price of $30.00 and a June 2018 maturity are trading at $2.30.   The option would be: Circle ( In-the-money     At-the-money    or    Out-of the money) What is the fundamental value of the option: Fundamental Value = _________________ What is the time premium of the option: Time premium = __________________ (4 pts) Assume you purchased a 3 month call option contract on a Stock BB with a strike price of $120 and a premium...