Maggie Lim is a share market investor that is thinking of venturing into the options market. She has come to you for some assistance in her understanding of the different options available and the payoffs of those options. a) If he were to take a long position in a call on BHP shares, which of the following of his position may be negative? (Choose most appropriate answer) (2 Marks) Profit Payoff b) If he had a short call option on XERO Shares for which he paid a premium of 50c and the exercise price of the option was $12 and the current market price was $10, at what market price would the options have: A zero payoff? (2 Marks) Answer to 2 decimal places with no, or $ or other symbols. 1. Answer: $ II. A zero profit? (2 Marks) Answer to 2 decimal places with no, or $ or other symbols. Answer: $ c) If he was to buy NAB Calls at a premium of $2.50 and the exercise price was $30.00 and the current spot price was $31.00, in the box below write down the following two numbers: 4 Marks) Answer to 2 decimal places with no, or $ or other symbols. Intrinsic Value $ Time Value $ d) Describe the impact that the following actions would have on the value of a put option (5 Marks): Decrease in volatility of the underlying Decrease or Increase Security Decrease in the time to maturity Decrease . or Increase Increase or Decrease Decrease in the spot price of the underlying Decrease in the exercise price of the underlying Decrease or Increase Decrease in the risk free rate Increase 4 or Decrease Maggie Lim is a share market investor that is thinking of venturing into the options market. She has come to you for some assistance in her understanding of the different options available and the payoffs of those options. a) If he were to take a long position in a call on BHP shares, which of the following of his position may be negative? (Choose most appropriate answer) (2 Marks) Profit Payoff b) If he had a short call option on XERO Shares for which he paid a premium of 50c and the exercise price of the option was $12 and the current market price was $10, at what market price would the options have: A zero payoff? (2 Marks) Answer to 2 decimal places with no, or $ or other symbols. 1. Answer: $ II. A zero profit? (2 Marks) Answer to 2 decimal places with no, or $ or other symbols. Answer: $ c) If he was to buy NAB Calls at a premium of $2.50 and the exercise price was $30.00 and the current spot price was $31.00, in the box below write down the following two numbers: 4 Marks) Answer to 2 decimal places with no, or $ or other symbols. Intrinsic Value $ Time Value $ d) Describe the impact that the following actions would have on the value of a put option (5 Marks): Decrease in volatility of the underlying Decrease or Increase Security Decrease in the time to maturity Decrease . or Increase Increase or Decrease Decrease in the spot price of the underlying Decrease in the exercise price of the underlying Decrease or Increase Decrease in the risk free rate Increase 4 or Decrease