Solution-Calculating the value of investment

Calculating the value of investment

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Reference no: EM133114608

Below is a table containing quotation information for PQR stock options traded on the options exchange on a given day. The current stock price is $114.

Expiration	Strike price	Calls		Puts
Expiration	Strike price	Vol.	Last	Vol.	Last
February	110	85	7.60	40	.60
March	110	61	8.80	22	1.55
May	110	22	10.25	11	2.85
August	110	3	13.05	13	4.70

Requested:

a. Suppose you buy 10 call option contracts on February 110. How much do you have to pay, assuming no commission? Draw a graph of the value (payoff) and profit and loss of your position! (1 option contract for 100 shares)

b. Regarding point (a), suppose the PQR share price at expiration date is $140 per share. What is the value (payoff) of your investment? How much if it cost $125?

c. If you buy 10 put option contracts on August 110. What is the maximum profit you can earn? Suppose the PR stock price at maturity (expiration date) is $ 104 per share. What is the value (payoff) of your investment? What is your net profit and loss? Draw it in graphic form!

Reference no: EM133114608

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Calculating the value of investment

Reference no: EM133114608

Reference no: EM133114608

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