Exercise No. Mod 6-1

Assume that a stock is selling for P66.75 with options available at 60, 65, and 70 strike prices. The 65 call option price is at P4.50.

a. What is the intrinsic value of the 65 call?

b. Is the 65 call in the money?

c. What is the speculative premium on the 65 call option?

d. What percentage does the speculative premium represent of common stock price?

e. Are the 60 and 70 call options in the money?

Exercise No. Mod 6-2

Assume a stock is selling for P48.50 with options available at 40, 50, and 60 strike prices. The 50 call option price is at P2.75.

a. What is the intrinsic value of the 50 call?

b. Is the 50 call in the money?

c. What is the speculative premium on the 50 call option?

d. What percentage of common stock price does the speculative premium represent?

e. Are the 40 and 60 call options in the money?

Exercise No. Mod 6-3

Assume a 40 July put option is purchased for 6.50 on a stock selling at P35 per share. If the stock ends up on expiration at 38.75, what will be the value of the put option?

Exercise No. Mod 6-4

Assume you sell 100 shares of Levis Corporation short at P72. You also buy a 70 call option for P5.25 to protect against the stock price going up.

a. If the stock ends up at P90, what will be your overall gain or loss?

b. If the stock ends up at P50, what will be your overall gain or loss?

Exercise No. Mod 6-5

Assume you sell 100 shares of Alston Corporation short at P43. You also buy a 40 call option for P4.80 to protect against the stock price going up.

a. If the stock ends up at P60, what will be your overall gain or loss?

b. If the stock ends up at P20, what will be your overall gain or loss?