Question
Use the following quotes for Target stock options: Ticker Calls Bid Ask Last IVM Volume TGT 3/18/22 C200 20.15 21.60 29.00y 35.07 TGT
Use the following quotes for Target stock options:\ \ Ticker Calls\ Bid Ask Last IVM Volume\ TGT 3/18/22 C200 20.15 21.60 29.00y 35.07 \ TGT 3/18/22 C210 13.45 13.80 14.25 32.58 16\ TGT 3/18/22 C220 8.35 8.65 9.65 31.34 20\ TGT 3/18/22 C230 4.85 5.15 5.10 31.07 35\ TGT 3/18/22 C240 2.70 2.95 2.85 31.08 16\ Ticker Puts\ Bid Ask Last IVM Volume\ TGT 3/18/22 P200 5.00 5.15 4.95 34.16 18\ TGT 3/18/22 P210 8.30 8.50 8.35 32.35 38\ TGT 3/18/22 P220 12.85 13.45 12.55 31.34 6\ TGT 3/18/22 P230 19.15 19.80 18.49 30.06 9\ TGT 3/18/22 P240 26.05 27.80 25.83 28.44 5\ Source: Bloomberg Finance L.P.\ \ Assume you purchased the right to sell 2,000 shares of Target stock in March 2022 at a strike price of $210 per share. Suppose Target stock sells for $199 per share immediately before your options expiration. What is the rate of return on your investment? What is your rate of return if the stock sells for $221 per share (think about it)? Assume your holding period for this investment is exactly three months.
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