Question
Problem 17-2 Calculating Payoffs Use the option quote information shown below to answer the questions that follow. The stock is currently selling for $33. Option
Problem 17-2 Calculating Payoffs
Use the option quote information shown below to answer the questions that follow. The stock is currently selling for $33.
Option and | Calls | Puts | |||||||||||||||
NY Close | Expiration | Strike Price | Vol. | Last | Vol. | Last | |||||||||||
Macrosoft | |||||||||||||||||
February | 35 | 91 | .83 | 46 | 1.83 | ||||||||||||
March | 35 | 67 | 1.07 | 28 | 2.24 | ||||||||||||
May | 35 | 28 | 1.35 | 17 | 2.66 | ||||||||||||
August | 35 | 9 | 1.56 | 9 | 2.70 | ||||||||||||
a. Suppose you buy 16 contracts of the February 35 call option. How much will you pay, ignoring commissions? (Do not round intermediate calculations.) Cost $ Suppose you buy 16 contracts of the February 35 call option and Macrosoft stock is selling for $36 per share on the expiration date. b-1. How much is your options investment worth? (Do not round intermediate calculations.) Payoff $ b-2. What if the terminal stock price is $35? (Do not round intermediate calculations.) Payoff $ Suppose you buy 16 contracts of the August 35 put option. c-1. What is your maximum potential gain? (Do not round intermediate calculations.) Maximum gain $ c-2. On the expiration date, Macrosoft is selling for $29 per share. How much is your options investment worth? (Do not round intermediate calculations.) Position value $ c-3. On the expiration date, Macrosoft is selling for $29 per share. What is your net gain? (Do not round intermediate calculations.) Net gain $ Suppose you sell 16 of the August 35 put contracts. d-1. What is your net gain or loss if Macrosoft is selling for $31 at expiration? (Input your answer as a positive value. Do not round intermediate calculations.) (Click to select)GainLoss $ d-2. What is your net gain or loss if Macrosoft is selling for $37 at expiration? (Input your answer as a positive value. Do not round intermediate calculations.) (Click to select)GainLoss $ d-3. What is the break-even price, that is, the terminal stock price that results in zero profit? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Break-even $
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