Question
An option contract gives its buyer the right to either buy or sell an underlying asset at a specific price on a specified date. Consider
An option contract gives its buyer the right to either buy or sell an underlying asset at a specific price on a specified date.
Consider the following situations and explain what the investor described in each situation should do when the option contract expires.
- Mike purchases a call option on Google Inc. stock at strike price of $1,750 per share. At expiration, the market price of Google stock is $1,900 per share.
- Ike purchases a call option on Google Inc. stock at strike price of $1,750 per share. At expiration, the market price of Google stock is $1,500 per share.
- Andrew sells a call option on Google Inc. stock at strike price of $1,750 per share. At expiration, the market price of Google stock is $1,800 per share.
- Alice purchases a put option on Google Inc. stock at strike price of $1,750 per share. At expiration, the market price of Google stock is $1,900 per share.
- Emma purchases a put option on Google Inc. stock at strike price of $1,750 per share. At expiration, the market price of Google stock is $1,500 per share.
- Jane sells a put option on Google Inc. stock at strike price of $1,750 per share. At expiration, the market price of Google stock is $1,800 per share.
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Investments Analysis And Management
Authors: Charles Jones, Nick Jones
11th Edition
0470477121, 9780470477120
