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) Suppose you purchase a call for the exercise price of 265 today
and keep it to maturity. If the main index closes at 270 at
maturity, what is the ?
(2) Suppose that today's exercise price of 265 foot is sold and
maintained until maturity. If the main stock index closes at 226 at
maturity, what is the return on maturity and profit or loss on
maturity?
(3) If today's exercise price of 260 call is purchased and the call
of 270 is sold at the same time, what is the maximum and minimum
value of the maturing income?
Answer(1): Call is bought when investor is bullish towards a particular security or market.
Buying price = 265, Selling price (index closes) = $270
Total profit: 270-265 = $5
Net profit = Total profit - Premium paid
Net profit/Loss: 5 - 9.5
Net loss = $4.5
Answer(3): When call is purchased, investor needs to pay premium and when call is sold, he will receive premium.
This strategy is called Bull call spread.
Paid premium = 13.7
Received premium = 6.5
Net premium paid: 13.7 - 6.5 = $7.2
Break even point: 260 + 7.2 = 267.20
Maximum loss = Net premium paid that is $7.2
Maximum profit = Difference between strike price - Net debit.
Answer(2): Suppose that today's exercise price of 265 foot, I am confused what is Foot? Please specify is it Put or Call? Then only I can answer.
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