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Posted on Jul 17, 2024

Question 2 (7 points): Following are the option prices for calls and puts for Marathon (MRO) with November 13th, 2020 expiration date. Suppose that your

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Question 2 (7 points): Following are the option prices for calls and puts for Marathon (MRO) with November 13th, 2020 expiration date. Suppose that your client Ben Bernanke currently owns 250 shares of MRO and have $2,500 in cash. He would like to use options to pick up additional income. While he is happy to sell MRO at $5.50 per share, Ben does not want to own any additional MRO. Given the big jump in MRO stock last Monday, November 9th, 2020 in which the stock rose from $4.67 at the open to close at $5.10 (9.21% increase), you predict that MRO may not increase any further in the future. In a memo, write your trade recommendation to Ben addressing the following: (1) The type(s) of options that you would recommend and more importantly, clearly explain your reason behind the trade(s). (2) The number of option contracts you would recommend Ben to trade and more importantly, clearly explain your calculation. (3) The total amount of premium that Ben will receive or pay and more importantly, clearly explain your calculation. MRO Go 5.09 A +0.00 (0.00%) Marathon Oil Corp Extended Hours: 5.17 A +0.080 (1.57%) Bid: 5.16 Ask: 5.19 Volume: 23,662 Open: -- Prev Close: 5.09 Spread: -0.03 High: 5.24 Low: 5.07 Size: 500 X 1100 Expiration Strike Type Bid Mid Ask 20 11/13/2020 7.00 Put 0.59 2.37 4.15 Volume 0.1. Delta Theta -0.6530 -0.1168 $ Order Type Quantity 1 Limit Price 4.15 Timing Day Limit Add A Leg + Action Buy to Open Buy to Close Sell to Open Sell to Close Cancel Last Brackets Spec. Cond. Review Order Max Gain: N/A Break Even: N/A Max Loss: N/A Calls and Puts Nov 13, 2020 8 Strikes Calls Puts Around the Money Basic View Change Bid Midpoint Ask Last Trade Volume Open Int 1.56 1.84 2.11 487 1.07 1.13 1.18 0.59 0.76 0.92 1,067 4,372 1,144 1,230 0.21 0.22 0.23 ||| 0.06 0.07 0.07 0 0.04 0.05 0.05 166 0.02 0.04 0 Strikes Symbol Calls Nov 13, 2020 (Fri: 04 days, Wkly) 3.50 MRO 11/13/2020 3.50 C 4.00 MRO 11/13/2020 4.00 C 4.50 MRO 11/13/2020 4.50 C 5.00 MRO 11/13/2020 5.00 C 5.50 MRO 11/13/2020 5.50 C 6.00 MRO 11/13/2020 6.00 C 6.50 MRO 11/13/2020 6.50 C 7.00 MRO 11/13/2020 7.00 C Puts Nov 13, 2020 (Fri: 04 days, Wkly) 3.50 MRO 11/13/2020 3.50 P 4.00 MRO 11/13/2020 4.00 P 4.50 MRO 11/13/2020 4.50 P 5.00 MRO 11/13/2020 5.00 P 5.50 MRO 11/13/2020 5.50 P 6.00 MRO 11/13/2020 6.00 P 6.50 MRO 11/13/2020 6.50 P 224 0.01 0.05 0.08 220 0.01 0.01 0 502 0.01 0.02 0.02 0 1,179 0.04 0.05 0.05 0 583 > A A A A A A A 0.15 0.16 0.17 0 71 0.02 0.27 0.51 0 19 0.94 0.97 1.00 0 14 1.42 1.47 1.51 0 0 Question 2 (7 points): Following are the option prices for calls and puts for Marathon (MRO) with November 13th, 2020 expiration date. Suppose that your client Ben Bernanke currently owns 250 shares of MRO and have $2,500 in cash. He would like to use options to pick up additional income. While he is happy to sell MRO at $5.50 per share, Ben does not want to own any additional MRO. Given the big jump in MRO stock last Monday, November 9th, 2020 in which the stock rose from $4.67 at the open to close at $5.10 (9.21% increase), you predict that MRO may not increase any further in the future. In a memo, write your trade recommendation to Ben addressing the following: (1) The type(s) of options that you would recommend and more importantly, clearly explain your reason behind the trade(s). (2) The number of option contracts you would recommend Ben to trade and more importantly, clearly explain your calculation. (3) The total amount of premium that Ben will receive or pay and more importantly, clearly explain your calculation. MRO Go 5.09 A +0.00 (0.00%) Marathon Oil Corp Extended Hours: 5.17 A +0.080 (1.57%) Bid: 5.16 Ask: 5.19 Volume: 23,662 Open: -- Prev Close: 5.09 Spread: -0.03 High: 5.24 Low: 5.07 Size: 500 X 1100 Expiration Strike Type Bid Mid Ask 20 11/13/2020 7.00 Put 0.59 2.37 4.15 Volume 0.1. Delta Theta -0.6530 -0.1168 $ Order Type Quantity 1 Limit Price 4.15 Timing Day Limit Add A Leg + Action Buy to Open Buy to Close Sell to Open Sell to Close Cancel Last Brackets Spec. Cond. Review Order Max Gain: N/A Break Even: N/A Max Loss: N/A Calls and Puts Nov 13, 2020 8 Strikes Calls Puts Around the Money Basic View Change Bid Midpoint Ask Last Trade Volume Open Int 1.56 1.84 2.11 487 1.07 1.13 1.18 0.59 0.76 0.92 1,067 4,372 1,144 1,230 0.21 0.22 0.23 ||| 0.06 0.07 0.07 0 0.04 0.05 0.05 166 0.02 0.04 0 Strikes Symbol Calls Nov 13, 2020 (Fri: 04 days, Wkly) 3.50 MRO 11/13/2020 3.50 C 4.00 MRO 11/13/2020 4.00 C 4.50 MRO 11/13/2020 4.50 C 5.00 MRO 11/13/2020 5.00 C 5.50 MRO 11/13/2020 5.50 C 6.00 MRO 11/13/2020 6.00 C 6.50 MRO 11/13/2020 6.50 C 7.00 MRO 11/13/2020 7.00 C Puts Nov 13, 2020 (Fri: 04 days, Wkly) 3.50 MRO 11/13/2020 3.50 P 4.00 MRO 11/13/2020 4.00 P 4.50 MRO 11/13/2020 4.50 P 5.00 MRO 11/13/2020 5.00 P 5.50 MRO 11/13/2020 5.50 P 6.00 MRO 11/13/2020 6.00 P 6.50 MRO 11/13/2020 6.50 P 224 0.01 0.05 0.08 220 0.01 0.01 0 502 0.01 0.02 0.02 0 1,179 0.04 0.05 0.05 0 583 > A A A A A A A 0.15 0.16 0.17 0 71 0.02 0.27 0.51 0 19 0.94 0.97 1.00 0 14 1.42 1.47 1.51 0 0