Use the data in the figure above to calculate the payoff and the profits for inv

Question

Use the data in the figure above to calculate the payoff and the profits for investments in each of the following January 2012 expiration options, assuming that the stock price on the expiration date is $165.Note: The “Last” column for the call is the call premium, C. The “Last” column for the put is the put premium, P. Assume 1 contract (100 shares).

a. Call option, X = 160

b. Put option, X = 160

c. Call option, X = 165

d. Put option, X = 165

e. Call option, X = 170

f. Put option, X = 170

IBM (IBM) Underlying stock price: Call Put Expiration Strike Sep 2011 160.00 Oct 2011 160.0011.9 Jan 2012 160.0015.00 Apr 2012 160.00 17.35 Sep 2011 165.00 Oct 201165.00 Jan 2012 165.0011.70 Apr 2012 165.00 14.30 Sep 2011 170.00 Oct 2011 170.00 Jan 2012 170.00 Apr 2012 170.00 11.32 Last 2.62 5.35 9.40 13.30 4.10 7.00 10.85 Last 9.15 5.80 8.70 3.00 5.86 8.93 6.20 9.25 13.00

Explanation / Answer

Payoff
1. Max(165-160,0)=5
2. Max(160-165,0)=0
3. Max(165-165,0)=0
4. Max(165-165,0)=0
5. Max(165-170,0)=0
6. Max(170-165,0)=5

Profit=Payoff-Premium
1. 5-15=-10
2. 5-9.4=-4.4
3. 0-11.7=-11.7
4. 0-10.85=-10.85
5. 0-8.93=-8.93
6. 5-13=-8

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