Calculate the payoff and the profits for investments in each of the following Ju
ID: 2646568 • Letter: C
Question
Calculate the payoff and the profits for investments in each of the following July maturity options, assuming that the stock price on the expiration date is $440. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round "Profit" to 2 decimal places.)
Calculate the payoff and the profits for investments in each of the following July maturity options, assuming that the stock price on the expiration date is $400. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round "Profit" to 2 decimal places.)
The following table lists prices of Apple options in April 2013 when Apple stock was selling for $420.Explanation / Answer
(a) Payoff Call Option Payoff = (Underlying Price - Excercise Price) Profit Underlying Price Excercise Price Put Option Payoff = (Excercise Price - Underlying Price) Action (Excersising option or not) Option price Payoff - Option Price i. Call option with exercise price of $390 $ 440.00 $ 390.00 $ 50.00 Positive Payoff so option shall be excercised $ 43.16 $ 6.84 ii. Put option with exercise price of $390 $ 440.00 $ 390.00 $ (50.00) (Negative payoff so option not to be excercised) $ 43.16 $ - iii. Call option with exercise price of $420 $ 440.00 $ 420.00 $ 20.00 Positive Payoff so option shall be excercised $ 25.75 $ (5.75) iv. Put option with exercise price of $420 $ 440.00 $ 420.00 $ (20.00) (Negative payoff so option not to be excercised) $ 25.75 $ - v. Call option with exercise price of $450 $ 440.00 $ 450.00 $ (10.00) (Negative payoff so option not to be excercised) $ 14.20 $ - vi. Put option with exercise price of $450 $ 440.00 $ 450.00 $ 10.00 Positive Payoff so option shall be excercised $ 14.20 $ (4.20) (b) Payoff Call Option Payoff = (Underlying Price - Excercise Price) Profit Underlying Price Excercise Price Put Option Payoff = (Excercise Price - Underlying Price) Action (Excersising option or not) Option price Payoff - Option Price i. Call option with exercise price of $390 $ 400.00 $ 390.00 $ 10.00 Positive Payoff so option shall be excercised $ 43.16 $ (33.16) ii. Put option with exercise price of $390 $ 400.00 $ 390.00 $ (10.00) (Negative payoff so option not to be excercised) $ 43.16 $ - iii. Call option with exercise price of $420 $ 400.00 $ 420.00 $ (20.00) (Negative payoff so option not to be excercised) $ 25.75 $ - iv. Put option with exercise price of $420 $ 400.00 $ 420.00 $ 20.00 Positive Payoff so option shall be excercised $ 25.75 $ (5.75) v. Call option with exercise price of $450 $ 400.00 $ 450.00 $ (50.00) (Negative payoff so option not to be excercised) $ 14.20 $ - vi. Put option with exercise price of $450 $ 400.00 $ 450.00 $ 50.00 Positive Payoff so option shall be excercised $ 14.20 $ 35.80
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