Question

Q1. Graph the 2 profit/loss payoff curves in a) and b) below, assuming you purchased each of the options in a) and b). On the graph provide labels to show the strike price, breakeven price, premium, and when the option is in the money" versus "out-of the money" etc. Label the graph carefully a) Put option: March Crude Oil (1000 barrels). March Futures = $45.12/bbl. Option Strike Price: $45 per barrel. Option Premium: $4.25 per barrel

Answer 1

	a)	PUT option +Future
		Strike Price =$45 per barrel
		Premium =$4.25
		S=Price at expiration
		Payoff from one option =Max. (45-S,0)
		Payoff from one future =(S-45.12)
		S	A	B	C=A+B-4.25	D=C*1000
		Price at Expiration	Payoff from Option	Payoff from future	Profit per barrel	Total Profit
		$35	$10	($10.12)	($4.37)	($4,370.00)
		$36	$9	($9.12)	($4.37)	($4,370.00)
		$37	$8	($8.12)	($4.37)	($4,370.00)
		$38	$7	($7.12)	($4.37)	($4,370.00)
		$39	$6	($6.12)	($4.37)	($4,370.00)
		$40	$5	($5.12)	($4.37)	($4,370.00)
		$41	$4	($4.12)	($4.37)	($4,370.00)
		$42	$3	($3.12)	($4.37)	($4,370.00)
		$43	$2	($2.12)	($4.37)	($4,370.00)
		$44	$1	($1.12)	($4.37)	($4,370.00)
		$45	$0	($0.12)	($4.37)	($4,370.00)
		$46	$0	$0.88	($3.37)	($3,370.00)
		$47	$0	$1.88	($2.37)	($2,370.00)
		$48	$0	$2.88	($1.37)	($1,370.00)
		$49	$0	$3.88	($0.37)	($370.00)
		$49.37	$0	$4.25	$0.00	$0.00	BREAKEVEN POINT
		$50	$0	$4.88	$0.63	$630.00
		$51	$0	$5.88	$1.63	$1,630.00
		$52	$0	$6.88	$2.63	$2,630.00
		$53	$0	$7.88	$3.63	$3,630.00
		$54	$0	$8.88	$4.63	$4,630.00
		$55	$0	$9.88	$5.63	$5,630.00
	b)	CALL option +Future
		Strike Price =$3.40 per bushel
		Premium =$0.18
		S=Price at expiration
		Payoff from one CALL option =Max. (S-3.40,0)
		Payoff from one future =(S-3.49)
		S	A	B	C=A+B-0.18	D=C*5000
		Price at Expiration	Payoff from Option	Payoff from future	Profit per barrel	Total Profit
		$2.50	$0.00	($0.99)	($1.17)	($5,850.00)
		$2.60	$0.00	($0.89)	($1.07)	($5,350.00)
		$2.70	$0.00	($0.79)	($0.97)	($4,850.00)
		$2.80	$0.00	($0.69)	($0.87)	($4,350.00)
		$2.90	$0.00	($0.59)	($0.77)	($3,850.00)
		$3.00	$0.00	($0.49)	($0.67)	($3,350.00)
		$3.10	$0.00	($0.39)	($0.57)	($2,850.00)
		$3.20	$0.00	($0.29)	($0.47)	($2,350.00)
		$3.30	$0.00	($0.19)	($0.37)	($1,850.00)
		$3.40	$0.00	($0.09)	($0.27)	($1,350.00)
		$3.50	$0.10	$0.01	($0.07)	($350.00)
		$3.535	$0.14	$0.04	$0.00	$0.00	BREAKEVEN
		$3.60	$0.20	$0.11	$0.13	$650.00
		$3.70	$0.30	$0.21	$0.33	$1,650.00
		$3.80	$0.40	$0.31	$0.53	$2,650.00
		$3.90	$0.50	$0.41	$0.73	$3,650.00
		$4.00	$0.60	$0.51	$0.93	$4,650.00
		$4.10	$0.70	$0.61	$1.13	$5,650.00
		$4.20	$0.80	$0.71	$1.33	$6,650.00
		$4.30	$0.90	$0.81	$1.53	$7,650.00
		$4.40	$1.00	$0.91	$1.73	$8,650.00
		$4.50	$1.10	$1.01	$1.93	$9,650.00
		$4.60	$1.20	$1.11	$2.13	$10,650.00
									Profit_question a(Put Option+Futurs) $8,000.00 $6,000.00 $4,000.00 o $2,000.00 $0.00 $0.00 ($2,000.00) $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 (54,000.00) ($6,000.00) Profit Question b(CALL Option+Fututre) 512,000.00 10,000.00 3,000.00 56,000.00 4,000.00 2,000.000 0.00 هد؟ $ 0 . 50 $ 1 . 00 $ 1 . 50 $ 200 $ 2 . 50 350 $ 3 . 00 400 450 500 2,000.00 (54,000.00 (56,000.00 | 53.000.000 ن ان. ال الاس م ال له -. قا 7. الام لا لا. لا اله الاف ام