Question

Please Show Your Work.

Calculate return for each of the six option contracts using (Pt – Pt-1)/P(t-1) where t denotes the lagged price by 1 period.

	APPL
			PrevClose	Open	Bid	Ask	Strike	Vol	Open Int	IV
1	ITM call	AAPL190118C00134000	13.70	14.90	13.65	15.10	134.00	23	69	57.15%
2	ITM call	AAPL190118C00134000	13.70	15.25	16.90	17.30	134.00	5	86	53.81%
3	ITM call	AAPL190118C00134000	15.25	15.25	20.05	20.65	134.00	5	81	72.90%
4	ITM call	AAPL190118C00134000	15.25	15.25	-	-	134.00	5	81	38.87%
5	ITM call	AAPL190118C00134000	15.25	15.25	18.15	19.05	134.00	5	81	38.87%
6	ITM call	AAPL190118C00134000	15.25	15.25	18.60	19.30	134.00	5	81	48.28%
7	ITM call	AAPL190118C00134000	15.25	15.25	19.15	19.9	134.00	5	81	60.40%
8	ITM call	AAPL190118C00134000	15.25	15.25	18.85	19.45	134.00	5	81	0.00%
9	ITM call	AAPL190118C00134000	15.25	15.25	19.9	20.05	134.00	5	81	53.32%

Answer 1

Answer 1 Return for each six option contract using( Pt - Pt-1)/PT-1 is given below:-

1. PT = PT-1 =13.7

using formula = 14.9-13.7/13.7= 8.759 %( return for each option)

2.Pt= 15.25, PT-1=13.7

using formula = 15.25- 13.7/13.7=11.25%

3.

Pt=15.25 , Pt-1= 15.25

using formula= 15.25-15.25/15.25= 0

(0+81)*5= 135

strike price 134

return= 135-134=1%

5. PT =19.5 Pt-1 =18.15

using formula = 19.5-18.5/18.5=5.4%

6. PT=19.30 ,Pt -1 = 18.60

using formula= 19.30- 18.60/18.60 =3.7%

7.PT =19.9 Pt-1=19.15

using formula= 19.9-19.15/19.5= 2.0%