Refer to Figure 15.1, which lists the prices of various IBM options. Use the dat
ID: 2721667 • Letter: R
Question
Refer to Figure 15.1, which lists the prices of various IBM options. Use the data in the figure to calculate the payoff and the profit/loss for investments in each of the following Oct-11 expiration options, assuming that the stock price on the expiration date is $167. (Leave no cells blank - be certain to enter "0" wherever required. Loss amounts should be indicated by a minus sign. Round "Profit/Loss" to 2 decimal places.)
Refer to Figure 15.1, which lists the prices of various IBM options. Use the data in the figure to calculate the payoff and the profit/loss for investments in each of the following Oct-11 expiration options, assuming that the stock price on the expiration date is $167. (Leave no cells blank - be certain to enter "0" wherever required. Loss amounts should be indicated by a minus sign. Round "Profit/Loss" to 2 decimal places.)
Explanation / Answer
Part a)
Call payoff = max ( spot –strike, 0)
= max( 167-160, 0)
= 7
Profit = payoff – premium paid
= 7 -11.95
= -4.95
Part b)
Put payoff = max ( strike- Spot, 0)
= max( 160-167, 0)
= 0
Profit = payoff – premium paid
= 0-5.35
= -5.35
Part c)
Call payoff = max ( spot –strike, 0)
= max( 167-165, 0)
= 2
Profit = payoff – premium paid
= 2-8.70
= -6.70
Part d)
Put payoff = max ( strike- Spot, 0)
= max( 165-167, 0)
= 0
Profit = payoff – premium paid
= 0-7
= -7
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