Question

•IBM stock price = $100 •Price of IBM call (exercise price = $100) and expiring in...

•IBM stock price = $100

•Price of IBM call (exercise price = $100) and expiring in two months = $2/share

• Alternative Investments

• A. Buy 100 shares of IBM: 100 x $100 = $10,000

• B. Buy 1 IBM call contract: 100 x $2   = $ 200

Suppose IBM stock rises to $120/share by expiration day for the call.

what is the return on the shares, and what is the return on the call?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
An investor has $9,000 to invest and believes that the IBM stock price is going to...
An investor has $9,000 to invest and believes that the IBM stock price is going to increase in the following 12 months from the current stock price of $200. Call options on IBM stock expiring in 12 months have a strike price of $207 and sell at a premium of $20 each. Assume that the stock price will be $265 per share after 12 months. 1. What will be the investor's rate of return if they buy 450 call options?...
You buy one IBM July 90 call contract for a premium of $4 each share and...
You buy one IBM July 90 call contract for a premium of $4 each share and one put contract for a premium of $2 each share. You hold the position until the expiration date when IBM stock sells for $98 per share. What is your total profit or loss? Remember each contract has 100 shares? I got 200, is this correct?
A European call option on a stock with a strike price of $50 and expiring in...
A European call option on a stock with a strike price of $50 and expiring in six months is trading at $14. A European put option on the stock with the same strike price and expiration as the call option is trading at $2. The current stock price is $60 and a $1 dividend is expected in three months. Zero coupon risk-free bonds with face value of $100 and maturing after 3 months and 6 months are trading at $99...
A European call option on a stock with a strike price of $50 and expiring in...
A European call option on a stock with a strike price of $50 and expiring in six months is trading at $14. A European put option on the stock with the same strike price and expiration as the call option is trading at $2. The current stock price is $60 and a $1 dividend is expected in three months. Zero coupon risk-free bonds with face value of $100 and maturing after 3 months and 6 months are trading at $99...
A European call option on a stock with a strike price of $75 and expiring in...
A European call option on a stock with a strike price of $75 and expiring in six months is trading at $5. A European put option on the stock with the same strike price and expiration as the call option is trading at $15. The current stock price is $64 and a $2 dividend is expected in three months. Zero coupon risk‐free bonds with face value of $100 and maturing after 3 months and 6 months are trading at $99...
A call option on the euro expiring in Six months has an exercise price of $1.00...
A call option on the euro expiring in Six months has an exercise price of $1.00 and is priced at $ 0.0385. Construct a simple long position in the call. determine the profit from the following basic foreign currency option transactions for each of the following spot rates at expiration: $0.90, $0.95, $1.00, $1.05, and $1.10. Construct a profit graph. Find the breakeven spot rate at expiration. Assume that each contract covers 100,000 euros. (Show answers in Excel if possible)
Question 8(12 marks) The common stock of IBM has been trading in a narrow price range...
Question 8 The common stock of IBM has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next three months. You do not know whether it will go up or down, however. The current price of the stock is $100 per share, the price of a three-month call option with an exercise price of $100 is $10, and a put with the...
You buy 100 shares of IBM for $110/share and simultaneously sell a 120 call option (100...
You buy 100 shares of IBM for $110/share and simultaneously sell a 120 call option (100 shares) for $1.25. If IBM is trading at $135, your profits are ______. need explanation a. 125 b. 375 c.  2500 d.  1125 correct answer
An investor owns 5,000 shares of IBM stock, $105 per share. He thinks that there is...
An investor owns 5,000 shares of IBM stock, $105 per share. He thinks that there is no large rise and possible drop in price. This investor decides to sell 50 December 110 call option at $4, receiving $20,000. Note: Each call option contract provides for the right to buy 100 shares of stock. December 110 call option means that the strike price of the call is 110 and it matures in December. If IBM stock price rises from $105 to...
2. Suppose you purchase a put option to sell IBM common stock at $100 per share...
2. Suppose you purchase a put option to sell IBM common stock at $100 per share in September. The current price of IBM is $85 and the option premium is $10. a. What is the intrinsic value of this option? As the expiration date on the option approaches, what will happen to the size of the option premium? b. What would be in intrinsic value if this was a call option?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT