Question

#9. Please help me solve for: "The profit​ (loss) experienced on option X" for options A-E. Thanks!

Options profits and losses for each of the 100-share options shown in the following table, use the underlying stock price at expiration and other information to determine the amount of profit or loss an investor would have had, ignoring brokerage fees Option Underlying stock price per share at expiration $51 Type of option Call Call Put Put Call Cost of option $190 $335 $495 $284 $476 Strike price per share $45 $45 $47 $50 $60 $39 $44 $25 $22

Answer 1

Profit of a long call option = (max(St - X, 0))*100 - cost of option

A. Profit = (max(51 - 45, 0)) * 100 - 190

Profit = (max(6, 0)) * 100 - 190

Profit = 6 * 100 - 190

Profit = $410

B. Profit = (max(47 - 45, 0)) * 100 - 335

Profit = 2 * 100 - 335

Profit = -$135.

Or a loss of $135.

Profit of a put option = (max(X - St, 0)) * 100 - cost of put option

C. Profit = (max(60 - 50 , 0)) * 100 - 495

Profit = max(10, 0) * 100 - 495

Profit = 10 * 100 - 495

Profit = 1,000 - 495

Profit = $505

D. Profit = max(39 - 44, 0) * 100 - 284

Profit = max(-5, 0) * 100 - 284

Profit = 0 * 100 - 284

Profit = -$284 Or a loss of $284

E. Profit = max(22 - 25, 0)* 100 - 476

Profit = 0 * 100 - 476

Profit = -$476 Or a loss of $476

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