Question

Using the table and information below to calculate the following: The value of the stock is currently $87, and expiration is Jan 16, Feb 16, and March 16. Briefly discuss your results.

Strike	Jan call	Feb call	March call	Jan put	Feb put	March put
80	4.0	5.5	7.1	1.8	1.9	3.0
85	3.2	4.3	6.0	2.3	3.5	4.0
90	2.6	3.8	4.4	3.2	4.0	5.8
95	1.9	2.1	3.2	4.5	5.2	6.9

1. Complete the profit/loss tables for 80, 85, 90, 95 at the end of the period.
2. Calculate the Long Straddle (buy long call and long put) using March 90 options

3. Calculate the Short Strip using the 95 March options.

4. Calculate the net value of a protective put position at an expiration stock price of 50. Use a strike price of 80.
5. Calculate the net value of a covered call position at an expiration stock price of 100. Use a strike price of 95.

Answer 1

a) Computation of the profit losstable for en strite Joncall felcall Fosfall Trupul Feliput Harper 85 (62) 2.3 (w 35 35 10 90 6.6 (3.8) (4.4) 1.2 1 208 950-1) (.1) (8.2) (3.) (9.8) Ciny 1 (6) long straddlet (Buy loup Call, Buy loup put) strite Janall Febcall Marcalo Janpul felfut Harput 90 (2.6)(3-6) (4.0) (0-2) (1) (28) C) Strort strip using as bacis points A short ship invoree writing for Calls and two puts all with the same exercise prire and Same Expiry date. This is adopted when decrease in Prce is more likely than increale, in Price. siure a put is more Profilable When a price decrease occurs so hoo puts are bought strite Tancall sef call Morrall bit feliput Inipul 95 (6.1) (6-9 (4.8) (9) Clou) 13:8) a. Net value of protective put position. Expiration stock Price - 50 strike Price: 80 so-so = 30 her value of protechire put - 30 b covered call position - 100-75 ES