Consider the October 2015 IBM call and put options in the table,

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. Ignoring any interest you might earn over the remaining few days' life of the options:

a. Compute the break-even IBM stock price for each option (i.e., the stock price at which your total profit from buying and then exercising the option would be zero).

b. Which call option is the most likely to have a return of

100%?

c. If IBM's stock price is $156 on the expiration day, which option will have the highest return?

IBM (INTL BUSINESS MACHINES) Oct 05 2015 @ 16:39 ET 149.04 4.46 Vol 4997840 Bid 148.72 Ask 149.04 Size 3 X 3 Last Sale Open Calls Open Net Bid Ask Vol Last Sale Puts Net Bid Ask Vol Int Int 35 234 786 662 834 855 180 81 3762 2395 2774 2985 15 Oct 140.00 (IBM1516J140) 15 Oct 145.00 (IBM 1516J145) 15 Oct 150.00 (IBM 1516J150) 15 Oct 155.00 (IBM 1516J155) 15 Nov 140.00 (IBM1506K140) 15 Nov 145.00 IBM1506K145) 15 Nov 150.00 (IBM1506K150) 15 Nov 155.00 (IBM1506K155) 9.55 4.10 9.15 9.50 4.95 2.86 4.80 5.20 1.50 1.13 1.53 1.54 0.23 0.19 0.18 0.19 6.77 0 10.45 11.05 5.83 1.58 6.70 6.90 3.86 1.84 3.65 3.85 1.72 0.90 1.67 1.74 390 15 Oct 140.00 (BM1516V140) 1689 15 Oct 145.00 (BM1516V145) 3380 15 Oct 150.00 (BM1516V150) 4569 15 Oct 155.00 (BM1516V155) 73 15 Nov 140.00 (IBM1506W140) 191 15 Nov 145.00 IBM1506W145) 43 15 Nov 150.00 IBM1506W150) 123 15 Nov 155.00 (BM1506W155) 0.36 -0.62 0.35 0.89 -1.30 0.86 2.44 -3.62 2.24 6.01 -5.99 5.60 1.76 -1.64 1.93 3.00 -2.69 3.20 8.66 0 5.40 8.30 0 7.85 0.36 0.87 2.47 6.30 2.00 3.35 5.55 8.80 34 33 54 78 0 94 314 135 11 0 2 0 Source: Chicago Board Options Exchange at www.cboe.com IBM (INTL BUSINESS MACHINES) Oct 05 2015 @ 16:39 ET 149.04 4.46 Vol 4997840 Bid 148.72 Ask 149.04 Size 3 X 3 Last Sale Open Calls Open Net Bid Ask Vol Last Sale Puts Net Bid Ask Vol Int Int 35 234 786 662 834 855 180 81 3762 2395 2774 2985 15 Oct 140.00 (IBM1516J140) 15 Oct 145.00 (IBM 1516J145) 15 Oct 150.00 (IBM 1516J150) 15 Oct 155.00 (IBM 1516J155) 15 Nov 140.00 (IBM1506K140) 15 Nov 145.00 IBM1506K145) 15 Nov 150.00 (IBM1506K150) 15 Nov 155.00 (IBM1506K155) 9.55 4.10 9.15 9.50 4.95 2.86 4.80 5.20 1.50 1.13 1.53 1.54 0.23 0.19 0.18 0.19 6.77 0 10.45 11.05 5.83 1.58 6.70 6.90 3.86 1.84 3.65 3.85 1.72 0.90 1.67 1.74 390 15 Oct 140.00 (BM1516V140) 1689 15 Oct 145.00 (BM1516V145) 3380 15 Oct 150.00 (BM1516V150) 4569 15 Oct 155.00 (BM1516V155) 73 15 Nov 140.00 (IBM1506W140) 191 15 Nov 145.00 IBM1506W145) 43 15 Nov 150.00 IBM1506W150) 123 15 Nov 155.00 (BM1506W155) 0.36 -0.62 0.35 0.89 -1.30 0.86 2.44 -3.62 2.24 6.01 -5.99 5.60 1.76 -1.64 1.93 3.00 -2.69 3.20 8.66 0 5.40 8.30 0 7.85 0.36 0.87 2.47 6.30 2.00 3.35 5.55 8.80 34 33 54 78 0 94 314 135 11 0 2 0 Source: Chicago Board Options Exchange at www.cboe.com