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Fin 321 - Fall 2016 - Homework 3

Autor:   •  April 20, 2017  •  Coursework  •  283 Words (2 Pages)  •  63 Views

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  1. The intrinsic value of a CALL option: Max (S-X, 0) = Max (77-70,0) = $7 per share.

Net profit for LONG CALL is [Max (S-X,0)-Premium]*100 shares*# of contracts =

[Max(77-70,0)-4]*100*11 = $3,300.

  1. The intrinsic value of a PUT option: Max (X-S,0) = max (40-34,0)=$6 per share.

Net profit for LONG PUT is [Max(X-S,0)-premium]*100 shares*# of contracts=

[Max(40-34,0)-2.70]*100*13 = $4,290

  1. 25 contracts at $1,068 per contract (10.68*100 shares per contract)= $26,700

  1. Options worth/value = intrinsic value = Max(S-X,0)

Stock price = $106.30: option value = 50(100)($106.30 − 100) = $31,500

Stock price = $102.20: option value = 50(100)($102.20 − 100) = $11,000

         

  1. Net profit/loss for a LONG PUT = [MAX(X-S,0)-premium]*100*# of contracts. This long put will have the maximum gain when Max(X-S,0) has the biggest value (i.e. S=0).

        When S=0, maximum gain is [Max(100-0,0)-4.90]*100*35 = $332,850

Options worth = intrinsic value for a put = Max(X-S, 0) = Max (100-84.75) = $15.25 per share.

Net gain (net profit/loss) = [MAX(X-S,0)-premium]*100*# of contracts = [Max(100-84.75,0)-4.90]*100*35 = $36,225.

a. Net gain/loss for a SHORT PUT = [-Max(X-S,0)+premium]*100*# of contracts.

When S=92, net gain/loss = [-Max(100-92,0)+2.40]*100*60 = -$33,600

When S=116, net gain/loss = [-Max(100-116,0)+2.40]*100*60 = $14,400

  1. Breakeven price for PUT = X-Premium = 100 – 2.4 = $97.60

Net gain/loss for a SHORT CALL = [-Max(S-X,0)+premium]*100*#of contracts

When S=40, net gain/loss = [-Max(40-50,0)+4.26]*100*28= $11,928

When S=50, net gain/loss = [-Max(50-50,0)+ 4.26]*100*28 = $11,928

When S=60, net gain/loss = [-Max(60-50,0)+ 4.26]*100*28 = -$16,072.

Net gain/loss for a SHORT PUT = [-Max(X-S,0)+premium]*100*# of contracts

When S=60, net gain/loss = [-Max(70-60,0)+2.40]*100*34 = -$25,840.

When S=70, net gain/loss = [-Max(70-70,0)+2.40]*100*34 = $8,160.

When S=80, net gain/loss = [-Max(70-80,0)+2.40]*100*34= $8,160.

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