Question

6. A call option has an exercise price of $45 and a premium of $4. If the price of the underlying stock is $60, the total payoff of the option is ____?

7. A put option has an exercise price of $20 and a premium of $2. If the price of the underlying stock is $11, what of the total payoff of the option?

8. You write a call option with an exercise price of $67 and a premium of $7. If the price of the underlying stock is $60, your total payoff is ____?

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

A. B 2 3 6 Call Option Exercise Price Call Premium Stock Price $45.000 $4.00 $60.00 Total payoff of call option $11.00 7 Put Option Exercise Price Put Premium Stock Price $20.00 $2.00 $11.00 Total payoff of Put option $7.00 8 Short Call Option Exercise Price Call Premium Stock Price $67.00 $7.00 $60.00 Total payoff of short call option $7.00

Cell reference -

00 AwN A 1 26 Call Option Exercise Price Call Premium Stock Price Total payoff of call option =MAX(C5-C3,0)-C4 10 7 20 Put Option Exercise Price Put Premium Stock Price 11 12 13 14 15 16 17 8 18 Total payoff of Put option =MAX(C11-C13,0)-C12 19 Short Call Option Exercise Price Call Premium Stock Price Total payoff of short call option =-MAX(C20-C18,0)+C19

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.