1. You purchased eight TJH call option contracts with a strike price of $37.50 w

Question

1.    You purchased eight TJH call option contracts with a strike price of $37.50 when the option quote was $.55. The option expires today when the value of TJH stock is $37.10. Ignoring trading costs and taxes, what is your total profit on your investment?

2.    You purchased five WXO 30 call option contracts at a quoted price of $.34. What is your total profit on this investment if the price of WXO is $33.60 on the option expiration date?

=(33.6-0.34-30)x100x4=1304                                                                                     

3.    You wrote ten put option contracts on JIG stock with a strike price of $40 and an option price of $.40. What is your total profit on this investment if the price of JIG is $41.05 on the option expiration date?

4.    You sold a put contract on EDF stock at an option price of $.25 and an exercise price of $22.50. The option expires today when EDF stock is selling for $21.70 a share. Ignoring transactions costs and taxes, what is your total profit on this investment?

5.    You own ten put option contracts on XYZ stock with an exercise price of $25. What is the total intrinsic value of these contracts if XYZ stock is currently selling for $24.50 a share?

6.    You own two call option contracts on ABC stock with a strike price of $15. When you purchased the contracts the option price was $1.20 and the stock price was $15.90. What is the total intrinsic value of these options if ABC stock is currently selling for $14.50 a share?

7.    You own ten put option contracts on XYZ stock with an exercise price of $25. What is the total intrinsic value of these contracts if XYZ stock is currently selling for $24.50 a share?

8.    The common stock of WIN is currently priced at $52.50 a share. One year from now, the stock price is expected to be either $54 or $60 a share. The risk-free rate of return is 4 percent. What is the per share value of one call option on WIN stock with an exercise price of $55?

9.    Tru-U stock is selling for $41 a share. A 6-month call on Tru-U stock with a strike price of $45 is priced at $1.60. Risk-free assets are currently returning .29 percent per month. What is the price of a 6-month put on Tru-U stock with a strike price of $45?

10. You wrote ten call option contracts on JIG stock with a strike price of $41 and an option price of $.60. What is your total profit on this investment if the price of JIG is $46.05 on the option expiration date?

11. The market price of ABC stock has been very volatile and you think this volatility will continue for a few weeks. Thus, you decide to purchase a one-month call option contract on ABC stock with a strike price of $25 and an option price of $1.50. You also purchase a one-month put option on ABC stock with a strike price of $25 and an option price of $.70. What will be your total profit on these option positions if the stock price is $24.60 on the day the options expire?

12. You sold ten put option contracts on PLT stock with an exercise price of $31.20 and an option price of $1.20. Today, the option expires and the underlying stock is selling for $33 a share. Ignoring trading costs and taxes, what is your total profit on this investment?

13. Three months ago, you purchased a put option contract on WXX stock with a strike price of $61 and an option price of $.60. The option expires today when the value of WXX stock is $63.50. Ignoring trading costs and taxes, what is your total profit on your investment?

14. You sold a put contract on EDF stock at an option price of $.50 and an exercise price of $21. Today, EDF stock is selling for $20 a share and your option position was closed out. Ignoring transaction costs and taxes, what is your total profit?

Explanation / Answer

1.   

Buyer of Call payoff=max(S-K,0)=max(37.1-37.5,0)=0

Buyer of Call profit=call payoff-premium=0-0.55=-0.55

So, for 8 options, loss=8*0.55=$4.40

2.   

Buyer of Call payoff=max(S-K,0)=max(33.6-30,0)=3.6

Buyer of Call profit=call payoff-premium=3.6-0.34=3.26

So, for 5 options, proft=5*3.26=$16.30

3.   

Writer of Put payoff=min(S-K,0)=min(41.05-40,0)=0

Writer of Put profit=put payoff+premium=0+0.4=0.4

So, for 10 options, proft=10*0.4=$4

4.   

Writer of Put payoff=min(S-K,0)=min(21.7-22.5,0)=-0.8

Writer of Put profit=put payoff+premium=-0.8+0.25=-0.55

So, for 10 options, loss=1*0.55=$0.55

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