Questions 1 to 11 are based on the option's chain data for TSLA. The data is as of the close of business on November 15, 2023 and the stock closed at a price of $242.

For all questions, assume you are a customer, not a dealer and assume all option contracts are for one share. Signs matter. Negative numbers, e.g., premium paid, should be shown as such.

 

Questions:

1.Calculate the net premium for a short straddle, expiry Dec 08, stuck at $245.

 

2.Calculate the net premium for a long straddle, expiry Dec 08, stuck at $245.

 

3.Calculate the net premium for a bull call spread using the $240 and $255 strikes , expiry Dec 8.

 

4.Based only on the information provided in the option chain, what is the approximate probability of the Dec 1, $255 strike put being exercised?

 

5.Assume you own TSLA stock at a price of $242, what is the max profit of a covered call strategy using the Dec 8 call stuck at $255?

 

6.Based only on the information provided in the option chain, and a closing price of $242, what is the implied move, i.e., +/- range in dollars, of TLSA stock over the upcoming year, based on the Dec 1, $245 puts?

 

7.Based on a normal distribution, what is the probability that TSLA stock remains with +/- one standard deviation of its current price during the next year?

 

8.Assume you own TSLA stock at a price of $242, what is the max loss of a protected put strategy using the Dec 1 call stuck at $235?

 

9.How much did you receive if you sold the most actively traded option in the Dec 1 series on November 15, 2023?

 

10.Assume you did not own TSLA stock and you sold the Dec 8 $250 call. What is you max profit?

 

11.Assume you own TSLA stock at a price of $230 and you sold the Dec 8 $250 call. What is you max loss?

 

12.Three month call options, struck at $15.50, on AT&T (T) are trading at $1.42. Assuming the stock is trading at $14 and interest rates are 5%, what is the price of the put with the same strike and expiry? Hint: Use put-call parity.

 

13.Six month put options, struck at $16.00, on AT&T (T) are trading at $2.35. Assuming the stock is trading at $14 and interest rates are 5%, what is the price of the call with the same strike and expiry? Hint: Use put-call parity.

 

14.Assume the VIX is trading at 14 and the S&P 500 is at 4,500. What is the implied move on the S&P 500 (+/-) index points, over the next 31 days. Round your answer to the nearest full point.

 

15.Using a one-step binomial model, calculate the risk neutral probability of an up move , given a risk-free rate of 5%, and up factor of 1.15 and a down factor of 0.85, for an option expiring in six months.

 

16.Using the information from the previous question calculate the value of a six moth call struck at $80, assuming the stock is currently trading at $75.

 

17.Using the information from the previous question, calculate the price of the put (same expiry and strike) using put-call parity.

 

18.Based on put call parity, write the equation for synthetic long call. For example, a synthetic long stock would be written as: S0= C+Xe(-r*t)-p

 

19.Based on put call parity, write the equation for synthetic long put. For example, a synthetic long stock would be written as: S0= C+Xe(-r*t)-p

 

20.Estimate the up-factor, used in the binomial option pricing model, for a six month option assuming annual volatility is 35%

 

21.Assume JPM is currently trading at $145. A three month call option, stuck at $140, is available for $7.25. What is the intrinsic value of this call option?

 

22.Assume WMT is currently trading at $155. A three month put option, stuck at $135, is available for $3.75. What is the intrinsic value of this put option?

 

23.Assume NFLX is currently trading at $465. A nine month call option, stuck at $460, is available for $9.65. What is the time value of this call option?

 

24.Assume prices on the S&P 500 are normally distributed with a mean of 4,000 index points and an standard deviation of 600 index points. What is the probability that the S&P 500 fall below 3,200 over next year?

 

25.Assume the probability of the stock market rising in any given year can be modelled as a binomial distribution, and is 65%. What is the probability that the stock market rises 12 or more times during the next twenty years?

Options Chain Calls Last Net Bid Ask Vol IV Delta Gamma Int 14 +3.225 13.8 14.3 1,810 0.46 0.664 0.0156 3408 12.43 +2.98 12.35 12.6 1,489 0.45 0.6235 0.0164 1443 11 +2.75 10.8 11.3 7,485 0.45 0.5815 0.0169 6864 8.5 +2.3 8.3 8.75 6,045 0.45 0.4956 0.0174 2391 6.39 +1.79 6.35 6.5 18,907 0.45 0.4112 0.0169 16889 6,042 0.45 0.3332 0.0158 3889 4.76 +1.41 4.75 4.8 Calls Last Net Bid Ask Vol Delta Gamma Int IV 20 +4.45 18.85 19.45 717 0.46 0.7128 0.012 1806 15.84 +3.24 15.65 15.9 865 0.45 0.6482 0.0133 1384 12.92 +2.82 12.65 13 1,572 0.45 0.5788 0.0141 5353 10.35 +2.4 10.1 10.5 1,574 0.44 0.507 0.0145 942 8.25 +2.075 8.15 8.3 3,436 0.45 0.436 0.0144 2325 6.55 1,449 0.45 0.3684 0.0137 1938 6.5 +1.75 6.35 Fri Dec 01 2023 Strike TSLA 235.000 TSLA 237.500 TSLA 240.000 TSLA 245.000 TSLA 250.000 TSLA 255.000 Fri Dec 08 2023 Strike TSLA 230.000 TSLA 235.000 TSLA 240.000 TSLA 245.000 TSLA 250.000 TSLA 255.000 Puts Last Net Bid 5.47 -2.13 5.4 6.45 -2.3 6.35 7.49 -2.56 7.25 9.95 -3.075 9.7 10 1,502 12.95 -3.45 12.65 12.95 621 16.35 -3.8 16.05 16.45 70 7.55 2,715 0.45 -0.4214 0.0171 500 7.55 2,715 0.45 -0.5084 0.0176 667 0.45 -0.5939 0.0172 1595 399 0.45 -0.6732 0.0161 Ask Vol 5.55 1,900 5.55 Total Records: 30 Delta Gamma Int IV 1,900 0.46 -0.3382 0.0158 2640 1,679 0.46 -0.3791 0.0165 1718 6.5 1,679 Puts Last Net Bid Ask Vol 5.43 -1.67 5.3 5.45 653 7.15 -2.05 7 7.15 615 9.17 -2.48 9.05 9.25 1,126 9.25 1,126 11.63 -2.895 11.25 11.85 582 14.08 -3.695 14.1 14.55 586 17.29 -4.01 17.3 18 42 IV Delta Gamma Int 0.46 -0.2893 0.0122 360 0.46 0.3545 0.0134 450 0.45 -0.4248 0.0143 245 0.45 0.4975 0.0147 1038 0.44 -0.5697 0.0146 959 0.45 -0.6386 0.014 376