Prices are available for call and put options

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The following prices are available for call and put options on an AAPL stock priced at $145. The risk-free rate is 1 percent and the volatility is 0.20. The options have 180 days remaining (expiring in November). The Black-Scholes model was used to obtain the prices. Exercise Calls Puts 140 11.12 5.44 150 6.28 10.54 160 3.22 17.44 Assume that each transaction consists of one contract (for 100 shares) unless otherwise indicated.

(1) Consider a bull money spread using the November 150/160 calls. How much will the spread cost?

(2) Consider a bull money spread using the November 150/160 calls. What is the profit if the stock price at expiration is $155?

(3) Consider a bull money spread using the November 150/160 calls. What is the breakeven point?

(4) Consider a bear money spread using the November 160/150 puts. How much will the spread cost?

(5) Consider a bear money spread using the November 160/150 puts. What is the profit if the stock price at expiration is $140?

(6) Consider a bear money spread using the November 160/150 puts. What is the breakeven point?

Reference no: EM131554875

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