Use the following option quotes to answer questions #24 through #29. Call Put Op

Question

Use the following option quotes to answer questions #24 through #29.

   Call   Put

   Option   Strike   Exp.   Vol.   Last   Vol.   Last

   Cisco   15.00   Oct.   491   2.26   559   0.25

   16.30   15.00   Nov.   259   2.90   154   1.00

   16.30   17.50   Oct.   680   0.85   522   1.60

   16.30   17.50   Nov.   142   1.33   40   2.31

   16.30   17.50   Feb.   51   1.95   28   3.77

   16.30   20.00   Oct.   828   0.30   915   4.05

   16.30   20.00   Nov.   123   0.55   212   4.67

28.   Suppose you bought 20 Cisco Oct 15 call contracts. Just before the option expires, the stock is selling for $18. What is your net profit (or loss)? Ignore transaction costs.

   a.  

Explanation / Answer

Answer 28)

1 call option with strike price X = 15, is an option to buy at 15

Now , if the stock price is 18 then profit by buying @ 15 and selling @ 18 is ( 18-15 ) = 3

Given 20 such options , Profit = 20 * 3 = 60

and with a lot of 100 the profit is = 60 * 100 = $6000

Answer 29)

1 Put option with strike price X = 20, is an option to sell at 20

Now , if the stock price is 19 then profit by buying @ 19 and selling @ 20 is ( 20-19 ) = 1

Given 10 such options , Profit = 10 * 1 = 10

and with a lot of 100 the profit is = 10 * 100 = $1000

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