Q You bought a stock for $40. You have decided to buy a protective put with a strike

price of $32. The premium is $5.

(a) Calculate the items listed in the table below:

Stock Price at Expiration 10 20 30 40 50 60 70

Put Option Value

Net Profit for Put

Value of Stock + Put

Profit on Stock

Net profit for Stock + Put

(b) Draw a graph that shows the payout and the profit for the combined stock and

put option.

Q. Relise stock is selling for $26.24. You purchase a call option on Relise that has a

strike price of $30 and a put option on Relise that has a strike price of $30. Both

options expire next month. The premium on the call is $0.40 and the premium on the

put is $4.30.

a What is this type of strategy called?

(b) Why would you engage in such a strategy?

q The table below contains information for an A Inc. call option. A. common

stock is currently selling for $43.20.

Expiration Strike Last Volume Open Interest

Nov 40.00 3.00 2156 11579

(a) When does the option expire?

(b) Is the option in the money?

(c) Interpret the `Last', `Volume', and `Open Interest' numbers.

(d) Suppose that on the expiration date the stock's price is $38.00. Will you exercise

the call option? What will your return be?