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 determine what each of the investors described below should do when the option contract expires, i e , whether each of them should execute the option contract and buy sell the underlying asset or to let the option contract expire 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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Posted on Jul 29, 2024

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 determine what each of the investors described below should do when the option contract expires, i.e., whether each of them should execute the option contract and buy/sell the underlying asset or to let the option contract expire.

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.