Calls Puts Strike Close Price Expiration Vol. Last Vol. Last Hendreeks 103 100 F

Question

Calls Puts Strike Close Price Expiration Vol. Last Vol. Last Hendreeks 103 100 Feb 72 5.20 50 2.40 103 100 Mar 41 8.40 29 4.90 103 100 Apr 16 10.68 10 6.60 103 100 Jul 8 14.30 2 10.10 Suppose you buy 35 February 100 call option contracts. Hendreeks stock is selling for $105.90 per share on the expiration date. How much is your options investment worth? What if the stock price is $101.80 on the expiration date? (Do not round intermediate calculations. Omit the "$" sign in your response.) Option Payoffs at $105.90 $ Option Payoffs at $101.80 $

Explanation / Answer

1.

Value of option = Market price of stock – Strike price = $105.90 - $100 = $5.90

Value of investment = $5.90 * 100 * 35 = $20,650

2.

Value of option = $101.80 - $100 = $1.80

Value of investment = $1.80 * 100 * 35 = $6,300

3.

Option payoff = Market price of stock – Strike price – Call premium = ($105.90 - $100 - $5.20) *35* 100 = $2,450

4.

Option payoff = ($101.80 - $100 - $5.20) * 100 * 35 = -$11,900

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