Question

6. Draw a profit diagram (label everything) for one short call option with a premium of...

6. Draw a profit diagram (label everything) for one short call option with a premium of $13.5 and an exercise price of $200. Show any breakeven points and label the maximum gain and the maximum loss (I need the exact numbers). The current stock price is $200. What would the profit be on 10,000 options if the ending stock price was $180? What would the profit be on 10,000 options if the ending stock price was $220? What would the ROR be if the ending stock price was $220?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

In a short call option, you are typically selling a call.

In this case the premium that you get by selling a call is 13.5$ and the excercise price is 200$.

The solution to each part is as below:

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
8. You have $5,000 to invest in shares of XYZ that currently trade at $50. You...
8. You have $5,000 to invest in shares of XYZ that currently trade at $50. You choose to invest 25% of your funds in long-term call options with a strike of $60 that currently are quoted at $1.50. The options expire in 12 months. The other funds will be placed into a money market account earning 1.0%, compounded monthly. How much in dollars would the stock price have to increase in order for you to breakeven on this strategy? 9....
Short a call option with a strike price of $1.25 and a premium of $0.12. Long...
Short a call option with a strike price of $1.25 and a premium of $0.12. Long a call option with a strike price of $1.35 and a premium of $0.02 Short a put option with a strike price of $1.35 and a premium of $0.03 Draw a final contingency graph including breakeven mas loss/gain.
A call option with a strike price of $1.30/€ and a premium of $0.03/€ is executed...
A call option with a strike price of $1.30/€ and a premium of $0.03/€ is executed as the market price is $1.39/€. The buyer of the option has purchased ten contracts (one contract is for €12,500). The total profit amounts to: Question options: €7,500 $7,500 €11,250 $11,250 Question 16 (1 point) Saved A trader holds a European put option with a strike price off $1.30/€ and a premium of $0.05/€. At the expiration date the market rate is $1.40/€. What...
Suppose you construct the following European option trades on Microsoft stock: purchase a call option with...
Suppose you construct the following European option trades on Microsoft stock: purchase a call option with an exercise price of $28 and a premium of $12 and write a call option with an exercise price of $62 and a premium of $6. What is your maximum dollar net profit, per share?
A trader sells a European call option on a share for 4 SEK. The stock price...
A trader sells a European call option on a share for 4 SEK. The stock price is 47 SEK and the strike price is 50 SEK. Under what circumstances does the trader make a profit? Under what circumstances will the option be exercised? Draw a diagram showing the variation of the trader’s profit with the stock price at the maturity of the option. Please carefully label: Breakeven point, profit, loss and don't forget the diagram.. thanks in advance!
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 $176 and IBM’s stock currently trades at $180. The option premium is $5 per contract. (LG 10-4) How much of the option premium is due to intrinsic value versus time value? page 350 What is your net profit on the option if IBM’s stock price increases to $190 at expiration of the option and you exercise the option? What...
Joe Brown purchased a call option on Cisco stock with a strike price of $40 for...
Joe Brown purchased a call option on Cisco stock with a strike price of $40 for a premium of $2 per share. 1) Before the option expires, Cisco stock price is $44. Will Joe strike or not? What would be his profit/loss? What is the return rate on his investment on the option trading (ignore the money used in purchasing stocks)? Is this not strike? since X>S, and call option 2) Assume instead, the price of Cisco stock is $39....
1) A call option on FDX stock specifies a strike price of $180. Today’s price of...
1) A call option on FDX stock specifies a strike price of $180. Today’s price of the stock is $174. The premium on the call option is $5. What price does FDX stock have to reach in order to break even assuming no transaction costs? 2) Compared to the FDX call option above with another FDX call option with an exercise price of $190 and a premium of $1. What might an investor who prefers the $190 strike, $1 call...
You purchase 10 call option contracts with a premium of $2.27 and an exercise price of...
You purchase 10 call option contracts with a premium of $2.27 and an exercise price of $75. If the stock price at expiration is $84.44, what is your percentage profit?
An investor purchases one call option (strike price $43 and premium $1.20) and purchases 3 put...
An investor purchases one call option (strike price $43 and premium $1.20) and purchases 3 put options (strike price $43 and premium $1.65) on the same underlying stock. What is the investor's total profit or loss (enter profit as positive or a loss as a negative value) per share if the stock price at expiration is $21.15?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT