Use the option quote information shown here to answer the questions that follow.
ID: 2745812 • Letter: U
Question
Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $43.
Suppose you buy 26 contracts of the February 45 call option. How much will you pay, ignoring commissions? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
Suppose you buy 26 contracts of the February 45 call option and Macrosoft stock is selling for $46 per share on the expiration date.
On the expiration date, Macrosoft is selling for $39 per share. How much is your options investment worth? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
What is your net gain or loss if Macrosoft is selling for $40 at expiration? (A loss amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
What is your net gain or loss if Macrosoft is selling for $47 at expiration? (A loss amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
What is the break-even price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Calls Puts Option and Strike NY Close Expiration Price Vol. Last Vol. Last Macrosoft Feb 45 101 1.83 56 2.83 Mar 45 77 2.07 38 3.24 May 45 38 2.35 27 3.66 Aug 45 19 2.56 19 3.70
Explanation / Answer
Part A
Total amount to be paid = no. of contracts x price per contract
= 26 x 1.83
= 47.58
Part B-1
Payoff = No. of contacts x (spot price – strike price) – total cost
= 26 x (46-45) -47.58
= 26-47.58
=-$ 21.58
Part B-2
Payoff = No. of contacts x (spot price – strike price) – total cost
= 26 x (45-45) -47.58
= 0-47.58
=$ 47.58
Part C-1
Total cost = no. of contracts x price per contract
= 26 x 3.70
= 96.20
Maximum price = Strike price x no. of contracts – total cost
= 45 x 26 -96.20
=1170 – 96.20
= $1073.80
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.