1. 3.

Calculating payoffs [LO 24.1] Use the option quote information shown here for NAB to answer the questions that follow. The shares are currently selling for $15.58.

1.
1. Suppose you buy 10 contracts of the NABSU8 20/08/20 call option.
How much will you pay, ignoring commissions?
2. In part (a), suppose that NAB shares are selling for $19 per share on the expiration date. How much is your options investment worth?
What if the terminal share price is $14? Explain.
3. Suppose you buy 10 contracts of the NABXS8 28/05/2020 put option.
What is your maximum gain? On the expiration date, NAB is selling for $12 per share. How much is your options investment worth? What is your net gain?
4. In part (c), suppose you sell 10 of the NABXS8 28/05/2020 put contracts. What is your net gain or loss if NAB is selling for $11 at expiration? For $19? What is the break-even price—that is, the terminal share price that results in a zero profit?

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Code P/C Exercise Bid Offer Last Volume Open Margin Expiry. date NABXS8 28/05/2020 Put NABQ59 25/06/2020 Call NABSU8 20/08/2020 Call NABP68 17/12/2020 Call interest price 14.5 1.07 1.37 1.2 340 725 1.415 15.01 1.445 2.01 0 16 1.425 1.425 1.26 18 0.86 0.86 0 1000 0 1.405 5 0 1.225 380 0.74