Question

TABLE 23.2 Pons Price Quotations Indenying Future May 2017 . 3814 3772 3760 Type: American Options Expiration: May 2017 Strike Range: At The Money Low Updated Limit Volume Hig Battle Change Las Bree Last Low Volume Updated Low 237 231 272 227 -40 267 3600 59 44 55 50 53 No 591 Lime 223 195 40 67 73 TO NO 676 Lim 00 05 102 203 165 197 370 86 94 07 No 917 LIM 889 201 357 17 14 -50 171 No 3949 m 375.0 103 CT 201 17 -14 10 117 CT 200 924 150 117 150 380 127 re 1 120 141 NA 1.095 Lim 00 0522 8 44 125 91 125 - 175 . NO OL Od 30 258 196 110 54 51 -24 191 5PS -18 186 207 NO 183 Lt oo 5o 77 -15 33 243 No 0 Lim 230 75 56 -21 75 282 - 1 Limi 185 57 55 +4 -15 405.0 122 201

Answer 1

A.

Strike price= 375 cents or $3.75

Option cost per bushel is last price of Call $3.75= 17.1 cents or 0.171$

So option cost per bushel of corn is $0.17100

B

Contract size = 5000

Total cost = contract size * option cost per bushel

=5000*0.171

=$855

C.

Stock price at Expiration = $3.62

Payoff of call option = Stock price at Expiration - Strike price

=3.62-3.75

=0

Value cannot be negative. It can be zero to lowest

Net profit or loss from position = (Payoff per bushel- cost per bushel)*Contract size

=(0-0.171)*5000

=-$855

D.

Stock price at Expiration = $4.05

Payoff of call option = Stock price at Expiration - Strike price

=4.05-3.75

=0.30

Value cannot be negative. It can be zero to lowest

Net profit or loss from position = (Payoff per bushel- cost per bushel)*Contract size

=(0.30-0.171)*5000

=$645

Answer

A. $0.17100

B. $855

C. Loss of $855

D. Profit of $645