Homework Answers
Ans 1) it depends whether the option is in the money or out the money.
Ans 2) Yes it will be executed automatically.
Ans 3) Highest gain: Unlimited
Highest loss: Call premium
Ans 4) Highest gain: strike price - put premium
Highest Loss: Put permium
Ans 5) Both are same
Ans 6) Both are same
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Home Task - Chapter 11. Long and Short Options Questions 1. Which is more profitable: to...
Normal No Spacing Heading 1 Heading 2 ... 1234 56 1. (5 pts) Which of the...
Normal No Spacing Heading 1 Heading 2 ... 1234 56 1. (5 pts) Which of the following is a TRUE statement about options? A. When an option is bought, it must be exercised prior to expiration B. When an option is bought, it must be exercised on the expiration date C. Calls must be exercised prior to expiration but puts do not have to be exercised D. Options do not have to be exercised ever 2. (5 pts) When you...
Use the option quote information shown here to answer the questions that follow. The stock is...
Use the option quote information shown here to answer the
questions that follow. The stock is currently selling for $114, and
the size of each contract is 100 shares.
a. Suppose you buy 10 contracts of the
February 110 call option. How much will you pay, ignoring
commissions?
b-1. Suppose you buy 10 contracts of
the February 110 call option and also suppose that Macrosoft stock
is selling for $140 per share on the expiration date. How much is
your...
1. Consider a call option selling for $ 4 in which the exercise price is $50....
1. Consider a call option selling for $ 4 in which the exercise price is $50. A) Determine the value at expiration and the profit for a buyer under the following outcomes: i. The price of the underlying at expiration is $55 ii. The price of the underlying at expiration is $51 iii. The price of the underlying at expiration is $48 B) Determine the value at expiration and the profit for a seller under the following outcomes: i. The...
questions 25-28 please 25. You buy a call option on Boeing Corp with an exercise price...
questions 25-28 please
25. You buy a call option on Boeing Corp with an exercise price of $40 and an expiration date in September, and you write a call option on Boeing Corp with an exercise price of $40 and an expiration date in October. This strategy is called a A. Time spread B. Long straddle C. Short straddle D. Money spread E. None of the above 26. The maximum loss a buyer of a stock's call option can suffer...
Use the option quote information shown here to answer the questions that follow. The stock is...
Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $43. Calls Puts Strike Option Expiration Price Vol. Last Vol. Last Macrosoft Feb 45 101 1.83 56 2.83 Mar 45 77 2.07 38 3.24 May 45 38 2.35 27 3.66 Aug 45 19 2.56 19 3.70 a. Suppose you buy 26 contracts of the February 45 call option. How much will you pay, ignoring commissions? Cost $ ...
Investor A owns 1,000 shares of XYZ stock. Investor A buys 10 call options on XYZ...
Investor A owns 1,000 shares of XYZ stock. Investor A buys 10 call options on XYZ stock. Investor B also owns 1,000 shares of XYZ stock and sells 10 call options on XYZ stock. A’s basis in his shares is $20,000 and B’s basis in her shares is $12,000. Both A and B owned their shares for 5 years prior to entering into any of the option transactions. A exercises his options and B is assigned on her options. Both...
Suppose the DJIA stands at 11,500. You want to set up a long straddle by purchasing...
Suppose the DJIA stands at 11,500. You want to set up a long straddle by purchasing 100 calls and an equal number of puts on the index, both of which expire in three months and have a strike of 115. The put price is listed at $1.50 and the call sells for $2.50. a. What will it cost you to set up the straddle, and how much profit (or loss) do you stand to make if the market falls by...
Use the option quote information shown here to answer the questions that follow. The stock is...
Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $43 Calls Puts Strike Vol 101 Vol 56 38 27 19 Last 2.83 3.24 3.66 3.70 Option Expiration Price Macrosoft Feb Mar May Aug 45 45 45 45 Last 1.83 2.07 2.35 2.56 38 19 a. Suppose you buy 26 contracts of the February 45 call option. How much will you pay, ignoring commissions? Answer is complete and correct. Cost 4,758...
I screenshot everything and put them in order, please complete every little boxes. the others are...
I screenshot everything and put them in order, please complete
every little boxes. the others are the info provided for it.
Problems: Nondirection Dependent Strategies -- Straddles and Strangles Straddles and Strangles can be profitable regardless of which way the underlying moves -- profitability is not dependent on the direction of the underlying. Depending on whether you are long or short the position, profitability may not depend upon a move at all. This does not by any means make them...
QUESTION 1 Michael opened a margin account with a discount, online broker. Two months ago he...
QUESTION 1 Michael opened a margin account with a discount, online broker. Two months ago he sold short 100 shares of stock; the market price of the stock at that time was $63.50. Today it is priced at $47.30. If he decides to “buy to close” (i.e., buy 100 shares of stock in order to close his open “short position”) what will be his net gain or loss? (For purposes of this problem assume each trade costs $25.) $1,620 gain...
Normal No Spacing Heading 1 Heading 2 ... 1234 56 1. (5 pts) Which of the following is a TRUE statement about options? A. When an option is bought, it must be exercised prior to expiration B. When an option is bought, it must be exercised on the expiration date C. Calls must be exercised prior to expiration but puts do not have to be exercised D. Options do not have to be exercised ever 2. (5 pts) When you...
Use the option quote information shown here to answer the
questions that follow. The stock is currently selling for $114, and
the size of each contract is 100 shares.
a. Suppose you buy 10 contracts of the
February 110 call option. How much will you pay, ignoring
commissions?
b-1. Suppose you buy 10 contracts of
the February 110 call option and also suppose that Macrosoft stock
is selling for $140 per share on the expiration date. How much is
your...
questions 25-28 please
25. You buy a call option on Boeing Corp with an exercise price of $40 and an expiration date in September, and you write a call option on Boeing Corp with an exercise price of $40 and an expiration date in October. This strategy is called a A. Time spread B. Long straddle C. Short straddle D. Money spread E. None of the above 26. The maximum loss a buyer of a stock's call option can suffer...
Suppose the DJIA stands at 11,500. You want to set up a long straddle by purchasing 100 calls and an equal number of puts on the index, both of which expire in three months and have a strike of 115. The put price is listed at $1.50 and the call sells for $2.50. a. What will it cost you to set up the straddle, and how much profit (or loss) do you stand to make if the market falls by...
Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $43 Calls Puts Strike Vol 101 Vol 56 38 27 19 Last 2.83 3.24 3.66 3.70 Option Expiration Price Macrosoft Feb Mar May Aug 45 45 45 45 Last 1.83 2.07 2.35 2.56 38 19 a. Suppose you buy 26 contracts of the February 45 call option. How much will you pay, ignoring commissions? Answer is complete and correct. Cost 4,758...
I screenshot everything and put them in order, please complete
every little boxes. the others are the info provided for it.
Problems: Nondirection Dependent Strategies -- Straddles and Strangles Straddles and Strangles can be profitable regardless of which way the underlying moves -- profitability is not dependent on the direction of the underlying. Depending on whether you are long or short the position, profitability may not depend upon a move at all. This does not by any means make them...
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