Suppose that you have taken a short position on a call option. The strike price if $55, and the option premium / price is $5. When the option expires, the value of the underlying asset is $54. What is your pay-off and profit / loss?
Spot Price on expiry is LOWER THAN Strike Price. Therefore, Buyer will LAPSE the option. Therefore, Premium recieved is our income.
Pay-Off = Higher of (Underlying Price on expiry-Strike Price) and 0 = $0
Profit/(Loss) = Premium Received - Pay-Off = 5-0 = $5
Suppose that you have taken a short position on a call option. The strike price if...
Suppose that you have taken a long position on a put option. The strike price is $125, and the option premium / price is $10. When the option expires, the value of the underlying asset is $90. What is your pay-off and profit / loss?
Suppose that you have taken a long position on a put option. The strike price is $125, and the option premium / price is $10. When the option expires, the value of the underlying asset is $90. What is your pay-off and profit / loss? please show your work
Suppose you sold a call option with a $50 premium. The strike price is $1,200. What is your expected payoff if the price of the underlying asset is $1,000.
Problem 6. A portfolio contains a long position in a call option with strike price $50, a short position in a call option with strike price $45, a long position in a call option with strike price $35, a short position in a call option with strike price S30. All the options are on the same stock and have the same expiration time. Find a formula for the value of the portfolio, V (S, t). Construct the pay-off function
Suppose that a call option with a strike price of $48 expires in one year and has a current market price of $5.15. The market price of the underlying stock is $46.24, and the risk-free rate is 1%. Use put-call parity to calculate the price of a put option on the same underlying stock with a strike of $48 and an expiration of one year. 1. The price of a put option on the same underlying stock with a strike...
You have taken a long position in a call option on IBM common stock. The option has an exercise price of $144 and IBM's stock currently trades at $148. The option premium is $6 per contract. a. How much of the option premium is due to intrinsic value versus time value? b. What is your net profit on the option if IBM’s stock price increases to $158 at expiration of the option and you exercise the option? c. What is...
If the price is $4 for a call option with strike of $30, what are the payoff and profit on a long position, if the option expires when the stock is $38.5?
4. A call option currently sells for $7.75. It has a strike price of $85 and seven months to maturity. A put with the same strike and expiration date sells for $6.00. If the risk-free interest rate is 3.2 percent, what is the current stock price? 5. Suppose you buy one SPX call option contract with a strike of 1300. At maturity, the S&P 500 Index is at 1321. What is your net gain or loss if the premium you...
You have taken a long position in a call option on IBM common stock. The option has an exercise price of $147 and IBM's stock currently trades at $152. The option premium is $6 per contract. a. How much of the option premium is due to intrinsic value versus time value? Option Premium Intrinsic value $ Time value b. What is your net profit on the option if IBM’s stock price increases to $162 at expiration of the option and...
The price of a call option with a strike of $100 is $10. The price of a put option with a strike of $100 is $5. Interest rates are 0 and the current price of the underlying is $100. Can you make an arbitrage profit? If so how? Describe the trade and your pay offs in detail?