John has been following the stock market very closely over the past 18 months and has a strong belief that future stock prices will be significantly higher. He has two altematives that he can follow. The first is to use a long-term strategy-purchase the stock today and sell it sometime in the future at a possibly higher price. The other alterative is to buy a three-month call option. The relevant information needed to analyze these alternatives is presented below: Current stock price = $49 Desires to buy one round lot = 100 shares Three-month call option has a strike price of $51 and a call premium of $1. a. In scenario one, if the stock price three months from now is $56: 1. What is the long-position profit or loss? 2. What is the breakeven point of the call option? 3. Is the option in or out of the money? 4. What is the option profit or loss? b. In scenario two, if the stock price three months from now is $42: 1 What is the lana.naction motit loco a1. If the stock price three months from now is $56, the long-position profit (or loss) is $ 700. (Round to the nearest dollar. Enter as a positive number for profit and a negative number for a loss.) a2. The breakeven point of the call option is $5,200. (Round to the nearest dollar.) a3. Is the option in or out of the money? (Select the best answer from the drop-down menu.) The option is in the money 24. The option profit for loss) is $400. (Round to the nearest dollar. Enter as a positive number for profit and a negative number for a loss.) 61. If the stock price three months from now is $42, the long-position profit (or loss) is $ - 700. (Round to the nearest dollar. Enter as a positive number for profit and a negative number for a loss.) b2. The breakeven point of the call option is $ 5,200. (Round to the nearest dollar.) b3. Is the option in or out of the money? (Select the best answer from the drop-down menu.) The option is out of the money 64. Since the option is out of the moneythen the call expires with no value profit and a negative number for a loss.) and the option profit (or loss) is $ - 100 (Select the best answer from the drop-down menu. Round to the nearest dollar. Enter as a positive number for John has been following the stock market very closely over the past 18 months and has a strong belief that future stock prices will be significantly higher. He has two altematives that he can follow. The first is to use a long-term strategy-purchase the stock today and sell it sometime in the future at a possibly higher price. The other alterative is to buy a three-month call option. The relevant information needed to analyze these alternatives is presented below: Current stock price = $49 Desires to buy one round lot = 100 shares Three-month call option has a strike price of $51 and a call premium of $1. a. In scenario one, if the stock price three months from now is $56: 1. What is the long-position profit or loss? 2. What is the breakeven point of the call option? 3. Is the option in or out of the money? 4. What is the option profit or loss? b. In scenario two, if the stock price three months from now is $42: 1 What is the lana.naction motit loco a1. If the stock price three months from now is $56, the long-position profit (or loss) is $ 700. (Round to the nearest dollar. Enter as a positive number for profit and a negative number for a loss.) a2. The breakeven point of the call option is $5,200. (Round to the nearest dollar.) a3. Is the option in or out of the money? (Select the best answer from the drop-down menu.) The option is in the money 24. The option profit for loss) is $400. (Round to the nearest dollar. Enter as a positive number for profit and a negative number for a loss.) 61. If the stock price three months from now is $42, the long-position profit (or loss) is $ - 700. (Round to the nearest dollar. Enter as a positive number for profit and a negative number for a loss.) b2. The breakeven point of the call option is $ 5,200. (Round to the nearest dollar.) b3. Is the option in or out of the money? (Select the best answer from the drop-down menu.) The option is out of the money 64. Since the option is out of the moneythen the call expires with no value profit and a negative number for a loss.) and the option profit (or loss) is $ - 100 (Select the best answer from the drop-down menu. Round to the nearest dollar. Enter as a positive number for
