Look at the stocks listed in Table 7.3. Pick at least three stocks, and find call option prices for each of them on finance.yahoo.com. Now find monthly adjusted prices and calculate the standard deviation from the monthly returns using the Excel function STDEV.P. Convert the standard deviation from monthly to annual units by multiplying by the square root of 12.

1. For each stock, pick a traded option with a maturity of about six months and an exercise price equal to the current stock price. Use the BlackScholes formula and your estimate of standard deviation to value each option. If the stock pays dividends, remember to subtract from the stock price the present value of any dividends that the option holder will miss out on. How close is your calculated value to the traded price of the option?

Only Tesla needs done

Table 7.3 Standard deviations for selected U.S. common stocks, January 2013December 2017 (figures in percent per y Stock Standard Deviation Stock Standard Deviation o United States Steel 73.0 Consolidated Edison 16.6 Tesla 57.2 The Travelers Companies 16.4 Newmont 42.2 ExxonMobil 14.0 Southwest Airlines 27.9 Johnson & Johnson 12.8 Amazon 26.6 Coca-Cola 12.6 Table 7.3 Standard deviations for selected U.S. common stocks, January 2013December 2017 (figures in percent per y Stock Standard Deviation Stock Standard Deviation o United States Steel 73.0 Consolidated Edison 16.6 Tesla 57.2 The Travelers Companies 16.4 Newmont 42.2 ExxonMobil 14.0 Southwest Airlines 27.9 Johnson & Johnson 12.8 Amazon 26.6 Coca-Cola 12.6