Refer to Figure 15.1, which lists the prices of various IBM options. Use the dat

Question

Refer to Figure 15.1, which lists the prices of various IBM options. Use the data in the figure to calculate the payoff and the profit/loss for investments in each of the following Sep-11 expiration options, assuming that the stock price on the expiration date is $164. (Leave no cells blank -be certain to enter "O wherever required. Loss amounts should be indicated by a minus sign. Round "Profit/Loss" to 2 decimal places.) Payoff Profit/Loss Call option, X= 160 b. Put option,X= 160 c. Call option, X 165 d. Put option,X= 165 e. Call option,X=170 f. Put option,X=170

Explanation / Answer

Call profit = max (Spot price – strike price, 0) – premium paid

Put profit = max (Strike Price – Spot Price, 0) – premium paid

Part a)

Call profit = (164 -160 , 0) – 9.15

                    = 4-9.15

                    = -.5.15

Part b)

Put profit = max (160 -164, 0) - 2.62

                   = -2.62

Part c)

Call profit = (164 -165 , 0) – 5.80

                    = 0-5.80

                    = -.5.80

Part d)

Put profit = max (165 -164, 0) – 4.10

                   = -3.10

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