Look at the Facebook option quotes in Figure 14.1, and focus on the call and put options
Question:
Look at the Facebook option quotes in Figure 14.1, and focus on the call and put options with a strike price of $80. Can you use put-call parity to infer what the market price of Facebook stock must have been when these option prices were quoted? To keep things simple, assume the options expire in one month, and that the risk-free rate at the time was 0%.
Figure 14.1
Strike PriceIn finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.
Option Chain | Most Actives | Greeks FB Options: Composite Calls & Puts Near the Money Type: Month Go Jul 15 l Aug 15 | Sep 15 | Oct 15 | Nov 15 Dec 15 | Jan 16| Jan 17 | Near Term | All Option Chain for Facebook, Inc. (FB) Calls Last Chg Bid Ask Vol Open Int Root Strike Puts Last Chg Bid Ask Vol Open Int Aug 21, 2015 8.40 -0.20 8.35 8.50 233 3142 FB 80 Aug 21, 2015 1.22 0.03 1.21 1.22 1110 6230 Aug 21, 2015 6.60 -0.10 6.50 6.60 109 FB 82.5 Aug 21, 2015 1.85 0.04 1.84 1.85 365 4491 Aug 21, 2015 4.90 -0.20 4.90 4.95 2330 66167 FB 85 Aug 21, 2015 2.68 0.03 2.70 2.71 1212 54821 3.80 3.85 255 2178 Aug 21, 2015 2.44 -0.14 2.42 2.43 2518 8663 FB 90 Aug 21, 2015 5.15 -0.05 5.15 5.25 168 539 6.80 6.90 132 326 Aug 21, 2015 0.96 -0.09 0.96 0.97 431 274FB 95 Aug 21, 2015 8.38 8.70 8.85 0 99 Aug 21, 2015 3.53 -0.17 3.50 3.55 1493 14194 FB 87.5 Aug 21, 2015 3.85 Aug 21,2015 1.56 -0.16 1.57 1.58 439 868 FB 92.5 Aug 21, 2015 6.85
Step by Step Answer:
Price of put option Price of stock Price of ...View the full answer
Fundamentals Of Investing
ISBN: 9780134083308
13th Edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
Related Video
Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
Students also viewed these Corporate Finance questions
-
Using the Facebook stock option quotations in Figure 14.1, find the option premium, the time value, and the stock index breakeven point for the following puts and calls. a. The August put with a...
-
Look at the Opti-tech call option prices in Table. Call prices increase as the strike price decreases, holding the expiration month constant. The strike prices decrease in increments of $2.50. Do the...
-
Look at the option quotes in Table 142 on page 368. a. What is the closing price of the common stock of SINGLE Systems? b. What is the highest strike price listed? c. What is the price of a December...
-
A vertical well is drilled through a stratigraphic section twice (repeated section). What type of fault can we infer, and why can we not explain this by folding?
-
If a portfolio had a return of 15%, the risk free asset return was 3%, and the standard deviation of the portfolio's excess returns was 34%, what is the risk premium?
-
The following transactions relate to the business of Kinky Heels n Boots Ltd. Ignore GST. Required: (a) Record the above transactions in general journal for Kinky Heels n Boots Ltd. (b) Calculate the...
-
Question: Kelly Hackworth took a leave of absence from her job at Progressive Insurance, to care for her ailing mother. When she offered to return, Progressive refused to give her the same job or one...
-
Matt Perry, Inc. had outstanding $6,000,000 of 11% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued $9,000,000 of 10%, 15-year bonds (interest payable July 1 and...
-
Question 1 The stocks of Wonka Inc. are expected to sell for $20 per share three years from now. Wonka has just paid a dividend of $1.50 per share and the dividends are expected to grow at a rate of...
-
Hollys Art Galleries recently reported $7.9 million of net income. Its EBIT was $13 million, and its federal tax rate was 21% (ignore any possible state corporate taxes). What was its interest...
-
Suppose that a call option with a strike price of $45 expires in one year and has a current market price of $5.16. The market price of the underlying stock is $46.21, and the risk-free rate is 1%....
-
Repeat the analysis of problem 14.7, but this time focus on the Facebook call and put options in Figure 14.1 that have a strike price of $87.50. If you use put-call parity to find the price of...
-
Supercharging of an engine is used to increase the inlet air density so that more fuel can be added, the result of which is an increased power output. Assume that ambient air, 100 kPa and 27C, enters...
-
Why is my code not printing anything? The indicators.py file should be printing charts but not a single one is printing and no errors are popping up. I also need the testproject.py file to be able to...
-
Find the derivative. 5+ Sec q P-5-sec9 ap O 25 35 35 35 dp dq ap O bp ap O II 10 sing (5 cos q-12 10 tanq (5-sec q 10 sin q dq (5 cos q-1) dp bp H Isetang (5-sec q
-
Identify the sentence below that makes no unnecessary shifts in verb tense. Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer. a...
-
Suppose that the expected return of the US market is 13.55% per year with volatility of 15.35%. The expected return of the GER market is 14.4% with volatility of 20.4%. The correlation between these...
-
Use your knowledge of production costs to help Frank better run his flower shop. Frank's Flowerstop Flower Shop Boquets of 1 dozen long- Total Cost Fixed Cost stemmed roses Variable Cost Average...
-
Calculate [CO 3 2- ] in a 0.010 M solution of CO 2 in water (H 2 CO 3 ). If all the CO 3 2- in this solution comes from the reaction what percentage of the H1 ions in the solution is a result of the...
-
According to a recent survey, 40% of millennials (those born in the 1980s or 1990s) view themselves more as spenders than savers. The survey also reveals that 75% of millennials view social...
-
Briefly describe each of the following types of bonds: (a) Treasury bonds, (b) Agency issues, (c) Municipal securities, and (d) Corporate bonds. Note some of the major advantages and disadvantages of...
-
Briefly define each of the following and note how they might be used by fixed-income investors: (a) zero-coupon bonds, (b) CMOs, (c) Junk bonds, and (d) Yankee bonds.
-
What are the special tax features of (a) Treasury securities, (b) Agency issues, and (c) Municipal bonds?
-
Assume all gases in this problem are ideal. A person is in a closed room (a racquetball court) with V = 486 m hitting a ball (m = 42.0 g) around at random without any pauses. The average kinetic...
-
What is Galileo? Group of answer choices Galileo is a Chinese satellite navigation system. Galileo is a space telescope that monitors satellites. Galileo is Russia's satellite navigation system....
-
The images obtained from all leads together provide the doctor with a full picture of the electrical activity moving Multiple select question. medially and laterally. left and right. forward and...
Study smarter with the SolutionInn App