Question

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

F.        all of the above.

1 B

You purchased the options below. Based on the information given, indicate whether the option is in the money, out of the money, or at the money, whether you should exercise the option if it were expiring today, and what the dollar profit and return would be.

Stock	Option	Strike Price	Today’s stock price	In/Out of Money	Option Premium	Exercise or not?	Profit (in $)	Return (in %)
	Call	10	11.23		1.10	YES	(11.23-10)-1.10 =1.23-1.10=0.13	0.13/1.10=11.82%
ABC	Put	10	11.23		0.95
XYZ	Call	25	27.00		1.05
XYZ	Put	25	27.00		2.25

Answer 1