36. Look at the following information of Intel options and answer the following question PRICES AT CLOSE, OCT 14, 2009 Intel (INTC) Call Expiration Strike Last Volume Open Interest Oct 2009 20.00 0.84 36929 101414 Nov 2009 20.00 1.21 11715 30765 Jan 2010 20.00 1.66 4709 127518 Apr 2010 20.00 2.10 684 4990 Oct 2009 21.00 0.17 77484 93413 Nov 2009 21.00 0.64 23848 25003 Jan 2010 21.00 1.11 22091 34338 Apr 2010 21.00 1.58 2073 6063 Oct 2009 22.00 0.02 10327 107054 Nov 2009 22.00 0.30 25995 27373 Apr 2010 22.00 1.15 2213 2679 Underlying stock price: 20.83 Put Last Volume Open Interest 0.03 8897 52083 0.52 7979 11172 0.98 3376 60439 1.50 414 7701 0.33 21907 8582 0.94 6407 3967 1.41 2440 4235 1.98 1355 828 1.22 2048 6865 1.63 959 762 191 Figure 2.9 Trading data on Intel options Source: Compiled from data downloaded from The Wall Street Journal Online October 15, 2009, Suppose you buy a November expiration call option with exercise price $21. a. If the stock price in November is $21.75, will you exercise your call? What are the profit and rate of return on your position? Since the stock price exceeds the exercise price, you exercise the call. The payoff on the option will be: $21.75 - $21 = 50.75 The cost was originally $0.64, so the profit is: $0.75 - 50.64 = 30.11 The rate of retum = 0.11 0.64 = 17.18%