Problem 2-18 Refer to Figure 2.10 and look at the IBM options. Suppose you buy a
ID: 2818615 • Letter: P
Question
Problem 2-18
Refer to Figure 2.10 and look at the IBM options. Suppose you buy a October 2013 expiration call option with exercise price $185.
Suppose the stock price in October is $193. will you exercise your call?
What is the profit (loss) on your position? (Input the amount as a positive value. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
If you had bought the October call with exercise price $180, will you exercise your call?
What is the profit (loss) on your position? (Input the amount as a positive value. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
If you had bought the October put with exercise price $180, will you exercise your put?
What is the profit (loss) on your position? (Input the amount as a positive value. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Refer to Figure 2.10 and look at the IBM options. Suppose you buy a October 2013 expiration call option with exercise price $185.
PRICES AT CLOSE, July 17, 2012 IBM (IBM) Underlying stock price: 183.65 Put Call Expiration Strike Last Volume Open Interest Last Volume Open Interest Jul Aug Oct Jan Jul Aug Oct Jan 180.00 5.50 180.00 6.85 180.00 9.70 180.00 12.58 85.00 2.80 85.004.10 185.00 6.99 185.00 9.75 620 406 184 52 2231 656 843 135 19982.11 21053.70 424 6.85 2372 10.25 3897 4.20 2656 6.26 969 9.10 3156 12.01 3080 847 245 76 2725 634 783 243 8123 3621 4984 3196 7370 3367 2692 10731Explanation / Answer
Answer ) bought call of 185 , Call give right to buy .
a.1) If stock price in oct is 193, that is 193 > 185 , exercise the option.
Answer ) yes
a.2) What is the profit (loss) on your position.
Profit = stock price - strike price - premium paid
= 193- 185- 6.99 =1.01
Answer ) Profit of $ 1.01.
Answer b ) bought call of 180 , Call give right to buy .
b.1) If stock price in oct is 193, that is 193 > 180 , exercise the option.
Answer ) yes
b.2) What is the profit (loss) on your position.
Profit = stock price - strike price - premium paid
= 193- 180- 9.70 =3.30
Answer ) Profit of $ 3.30.
Answer C ) bought Put of 180 , Put give right to sell .
c.1) If stock price in oct is 193, that is 193 > 180 , don't exercise the option.
Answer ) No
c.2) What is the profit (loss) on your position.
Loss = premium paid
= 6.85
Answer ) Loss of $ 6.85
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.