Attempts: 1 2 Keep the Highest: 2/7 1. Option basics The Chicago Board Options Exchange (CBOE) is one of the world's largest options exchanges. CBOE and other options exchanges trade contracts that give buyers and sellers the right to trade investment assets at a specific price within a specific time period. A call option gives the option holder the right to sell an asset at a fixed price during particular period. The fixed price that the asset may be sold at is called the exercise price. The following table shows the options quotation in U.S. dollars for Merry Melon Fruit Company for June 30 of this year. Option Strike Price Closing Price $47.00 Call - Last Quote September $3.00 Put - Last Quote September $3.30 1 $51.00 2 $47.00 $44.00 $4.50 $1.80 3 $47.00 $53.00 $2.40 $3.90 If you could exercise the options listed anytime on or before the expiration date (the third Friday of September), then these options would be antions Assume that the options listed in the table are American options. Which of the put options for Merry Melon Fruit Company listed in the table are in- the-money on June 30? O Option 1 and option 3 O Only option 2 O All of the options None of the options The Merry Melon Fruit Company stock was selling at $30 per share on the first day of this month. If you had a call option on the first of the month with an exercise price of $27 and if the option also expires on the first, the value of the option would be than the difference in the stock price and exercise price If the call option expires in six months, the value of the option is likely to be of the call option at expiration. If you had a put option on the first of the month with an exercise price of $27 and if the option also expires on the first, the value of the option would be . If the put option expires in six months and the stock price decreases, the value of the option is likely to Now suppose you have another call option and a put option. The selling price of Merry Melon's stock is $30 per share on the first day of this month and the exercise price for both the call and put options $36. If the exercise price of the call option is $36 and the option expires on the first, the value of the option is If the call option expires in six months and the market expects the stock price to increase, the value of the call option is likely to If the exercise price of the put option is $36 and the option expires on the first, the value of the option is If the put option expires in six months and the market expects the stock price to increase, the value of the put option is likely to