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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

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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