Several rumors concerning Value Rite stock are causing the market price of the stock to be quite volatile. Given this situation, you decide to buy both a one-month European $25 put and a one-month European $25 call on this stock. The call price per share is $0.60 and the put price per share is $2.10. What will be your net profit or loss on these option positions if the stock price is $18 on the day the options expire? Ignore trading costs and taxes.
Net profit = [-$0.60 × 100] + [(-$2.10 + $25 - $18) × 100] = $430
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66.
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Three months ago, Central Supply stock was selling for $51.40 a share. At that time, you purchased five put options on the stock with a strike price of $52 per share and an option price of $0.60 per share. The option expires today when the value of the stock is $42.70 per share. What is your net profit or loss on this investment? Ignore trading costs and taxes.
Net profit = (-$0.60 - $42.70 + $52) × 100 × 5 = $4,350
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67.
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You wrote two put options on Xylo stock with an exercise price of $30 per share and an option price of $1.05 per share. Today, the contracts expire and the stock is selling for $31.15 a share. What is your net profit or loss on this investment? Ignore trading costs and taxes.
Net profit = $1.05 × 100 × 2 = $210. The put finished out of the money.
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68.
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You sold ten put contracts on Cross Town Bank stock at an option price per share of $0.85. The options have an exercise price of $39 per share. The options were exercised today when the stock price was $34 a share. What is your net profit or loss on this investment assuming that you closed out your positions at a stock price of $34? Ignore transaction costs and taxes.
Net loss = ($0.85 - $39 + $34) × 100 × 10 = -$4,150
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