1. Call and put options with an exercise price of $30 are traded on one share of...
Question:
1. Call and put options with an exercise price of $30 are traded on one share of Company X stock.
a. What are the value of the call and the put if the stock is worth $33 when the options expire?
b. What are the value of the call and the put if the stock is worth $22 when the options expire?
c. What is the value of the call writer’s obligation if the stock is worth $33 when the options expire? What is the value of the put writer’s obligation if the stock is worth
$33 when the options expire?
d. What is the value of the call writer’s obligation if the stock is worth $22 when the options expire? What is the value of the put writer’s obligation if the stock is worth
$22 when the options expire?
e. Suppose that the purchaser of a call in part a paid $1.75 for his option. What was his profit on his investment?
f. Suppose that the purchaser of a call in part b paid $1.75 for his option. What was his profit on his investment?
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