Question

Q8 For this problem, use the table on the following page. (This is a table of options prices on IBM which is similar but not the same as the one we covered in class.)

Investor BBB decides to sell the following options:

the K = 125, T = JAN10 call and the K = 105, T = JAN09 put,

and at the same time buy the following options:

the K = 90, T = JAN10 call and the K = 105, T = JAN09 put.

Calculate the total Cash Flow/share for BBB.
S 105 CALLS PUTS 50.90 45.40 40.1040.50 35.70 37.20 38.60 48.20 30.28 30.8032.30 33.50 48.30 60 65 70 75 80 25.30 26.60 28.60 28.80 32.38 85 20.9021.2024.40 24.90 25.70 90 17.36 18.0018.40 20.40 22.90 27.00 95 11.40 11.60 14.70 18.10 18.25 100 6.30 8.2011.00 13.60 18.0021.50 105 2.90 4.808.20 10.55 13.60 110 115 120 125 130 135 140 145 150 160 170 1.05 1.75 1.90 1.10 2.40 1.85 3.97 1.40 2.45 4.38 52.60 .30 .55 .60 .75 50 70 .05 .30 60 1.30 3.205.906.80 2.304 1.95 3.40 5.70 8.70 4.80 6.10 8.9011.83 2.35 4.10 6.90 8.00 11.00 2.705.907.70 11.8016.80 5.50 6.90 9.109.8012.80 18.50 1.313.956.75 10.30 .60 25 10.80 11.60 12.8015.00 15.60 2.60 5.20 7.10 12.50 15.30 15.90 16.50 18.0018.50 23.50 1.65 3.70 1.15 1.80 4.30 9.60 .80 10.30 20.90 21.80 25.60 26.20 33.10 24.80 27.5031.20 1.75 .95 .80 3.10 7.20 35.70 38.70 .30 1.65 4.70 1.20 .50 4.00

Answer 1

The solution to the given question is provided below:

Cash flow per share=10.30+11-27-11=-16.7
Net outflow of $16.70 per share