40. An investor writes 1 ABC Dec 60 put for 56. What 00 loss? b. $5,400 c. $6,60

Question

40. An investor writes 1 ABC Dec 60 put for 56. What 00 loss? b. $5,400 c. $6,600 d. Unlimited e. None of the above is the maximum 41. Ir XYZ stock trades at $48.25, what is the time value of a XYZ August call trading at $8.s0? a. 0 b. 8.50 c. 5.25 d. 3.25 e. None of the above vestor buys 100 XYZ stock at $50, and also buys 1 XYZ December 45 put for $5. xY2z xercises his put, and sells his stock. What are the stock declines to $30, and the investor e investor's gains or losses? a. Zero, he is fully hedged. b. $1,000 gain c. $1,000 loss d. $2,000 loss e. $2,000 gain 43. An investor with no other securities writes DDD March 45 put for a premium of $5.25 when DDD is $50. What is the investor's maximum gain? a. $525 b. $4,075 c. $5,025 d. Unlimited e. None of the above

Explanation / Answer

40) Option [b] $5400 Correct answer: Maximum loss = Strike price - Premium = 100*(60-6) = $         5,400 41) Option [c] Time value of call option = Premium-Intrinsic value = 8.50-(48.25-45.00) = $            5.25 42) Option [c] Position on the stock = 100*(30-50) = $        -2,000 Position on the put = 100*(45-30-5) = $         1,000 Net loss $        -1,000 43) Option [a] Maximum gain is the premium received = 5.25*100 = $       525.00

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