Use data from finance.yahoo.com to answer the following questions. In the Get Qu
ID: 2773743 • Letter: U
Question
Use data from finance.yahoo.com to answer the following questions. In the Get Quotes box, enter stock symbol MCD for McDonald's. Go to the S & P stock reports section for McDonald's.
c. Click on the link to Options on the left side of Yahoo! Finance screen. Choose an expiration date three months in the future, and then choose one of the call options listed by selecting an exercise (strike) price. What iis the last price (premium) shown for the call option?
d. Is the call option in money?
f. Repeat the steps for a put option on McDonald's with the same expiration date and the same strike price.
Explanation / Answer
From finance.yahoo.com, for stock symbol MCD – Macdonald’s Corporation the following details are extracted
Current Market Price = $ 102.82
Call option is an option to buy an asset at an agreed price (strike price) on or before a particular date (expiry date). The option will be in the money if the strike price is lower than the current market price as the option holder can buy the asset at the strike price and sell at the market for profit.
Call Option No MCD151218C00092500 following details are available
Strike Price = $ 92.50
Expiry Date = 18th December 2015
Last close price shown = $ 11.21 (premium)
Since the market price ($ 102.82) is higher than the strike price ($92.50) this option is in the money.
Put option is an option to sell an asset at an agreed price (strike price) on or before a particular date (expiry date). A put option will be in the money if the strike price is more than the current market price so that the option holder can buy the asset at current market price and sell at strike price for a profit.
Based on the data available from finance.yahoo.com, details of put option of MCD for strike price of $ 92.50 and expiry date 18th December 2015 are as follows
Put Option No MCD151218P00092500
Expiry Date = 18th December 2015
Strike Price = $ 92.50
Price = $ 0.83
The above put option is actually out of money as the strike price is lower than current market price. However the price $ 0.83 shown is due to the transaction costs associated with writing the option.
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