A call option on an S&P 500 futures contract has an exercise price of 1490; the call
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Question:
A call option on an S&P 500 futures contract has an exercise price of 1490; the call premium is currently $6.50.On the same date, a put option on the S&P 500 futures contract has an exercise price of 1490; the put premium is currently $7.50.The two options have the same expiration date.
A.Is the current index value greater than or less than 1490?How do you know?
B.Assume that the S&P 500 index is 1485 at expiration:
Should thecall optionbe exercised or should it be left to expire?What is the net ($) gain or loss after accounting for the premium paid to purchase the option?
Should theput optionbe exercised or should it be left to expire?What is the net ($) gain or loss after accounting for the premium paid to purchase the option?
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