1. For all questions in this section. Option quotations on a stock are shown bel
ID: 2723384 • Letter: 1
Question
1. For all questions in this section. Option quotations on a stock are shown below. The current stock price, S, is $104 per share. The August 90 CALL option is:
2. Calculate the intrinsic value of the August 90 CALL per contract
A.$1,400
B.$1,562.50
C. $0
D. None of the above
3.The TIME VALUE per share of the August 90 CALL is:
a. $0
b. 1.625
c. $15.625
d. $14
e. None of the above
4.If the August 90 CALL expires at-the-money, the August 90 PUT would expire
a. at the money
b. in the money
c. out of the money
5.If the option expires out-of-the money, your gain or loss per contract is:
a. -1,562.5
b. -1,400
c. 0
d.-1,625
6.If the option expires at-the-money, your gain or loss per contract is:
a. -1,562.5
b. -1,400
c. 0
d.-1,625
7. What is the maximum gain that the writer of the Oct 115 PUT stands to make?
$100 per contract
The intrinsic value of the put at expiration
The exercise price of the option
$100 per contract
$1,600 per contract
The intrinsic value of the put at expiration
The exercise price of the option
Strike 90 95 110 115 Expiration Aug Aug Oct Oct Call 15.625 11.75 8.75 6.375 Put 1.1875 2.25 14.125 16Explanation / Answer
2. Intrinsic Value = (Spot Price – Strike Price) x $100
=> ($104 - $90) x 100 = $1,400
3. Time value per share is = Premium – Intrinsic Value
=> $15.625 - $14 = $1.625
4. at the money
5. In case of out of money, your total loss is equal to total premium paid.
So, total loss = 15.625 x 100 = -$1,562.5
6. If the option expires at-the-money, the loss per contract is 0.
7. Maximum Gain for writer = 100 x $16 = $1,600
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