Use the option quote information from Euronext Liffe shown here for Xstrata plc to answer the questions that follow. The equity is currently selling for £11.025.

(a) Are the call options in the money? What is the intrinsic value of an Xstrata plc call option?

(b) Are the put options in the money? What is the intrinsic value of an Xstrata plc put option?

(c) Looking at the quotes on their own, do you think that the market expects the price of Xstrata to increase or decrease during the period of the option? What range of prices are anticipated? Look at the share price history for Xstrata on Yahoo! Finance and find out what actually happened. Who made a profit from their trading – the call or put holders?

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Day Settl. O.I. Vol Last 463.00 423.00 558 383.00 35 27 419 88 B 1 6.40 P 6.80 P 7.20 P 343.00 312.50 370.00 C 7.60 P 303.00 272.00 330.50 C 8.00 P 263.50 233.50 291.50 C 8.40 P 225.50 583 208.00 238.00 C 8.80 P 188.50 16 171.00 201.00 C 9.20 P 153.50 149 144.00 159.00 C 9.60 P 122.00 2,620 112.00 127.00 C 10.00 P 80.50 154 76.00 82.00 C 10.60 P 58.50 699 55.00 60.00 C 11.00 P 38.00 4,742 20 43.50 34.50 22.50 3,537 47 21.00 20.00 8.00 2,456 5.50 1.50 1,679 0.00 140 0.00 - 1 I 1 1 - 1 - - - - Calls - 116 - - = 1 1 Bid Ask 431.50 490.00 C 391.50 450.00 C 352.50 410.00 C I Strike F Bid 1 Ask 5.50 6.00 6.50 5.50 0.50 7.00 2.50 8.50 7.00 12.50 20.00 30.00 50.50 69.00 39.00 C 11.50 P 97.50 23.50 C 12.00 P 130.00 9.50 C 13.00 P 205.00 5.00 C 3.50 C 5.00 C Puts 14.00 P 285.50 345.00 15.00 P 384.00 443.00 16.00 P 484.00 543.50 Last 12.50 17.50 22.50 33.50 55.00 74.50 66.00 104.00 142.50 127.00 235.00 205.00 Day Vol I - 49.00 15 15 3 5 un w - - F O.I. 62 781 1,276 47 641 135 Settl. 0.50 0.50 1.00 2.50 3.50 5.50 944 9.50 1,339 14.50 1,017 21.00 1,830 31.00 1,095 51.00 4,477 69.50 1,729 99.00 3,038 134.00 973 219.00 454 313.00 8 412.00 22 512.00