Finance Derivatives<\/p>\n
Assume the current market prices for UUU, WWW, XXX, YYY, and ZZZ are<\/p>\n
$24.15, $7.50, $33.00, $25.68, and $83.98 respectively. Determine whether<\/p>\n
the following options are in, at, or out of the money. Let 1 be “in”,<\/p>\n
0 be “at”, and -1 be “out”.<\/p>\n
1. A PUT OPTION you are holding on UUU stock has a strike price of $24.00.<\/p>\n
The put premium on the option was $0.16 per share when you bought it.<\/p>\n
2. A call option you are holding on WWW stock has a strike price of $7.50.<\/p>\n
The call premium on the option was $0.21 per share when you bought it.<\/p>\n
3. A call option you wrote on XXX stock has a strike price of $33.00.<\/p>\n
The call premium on the option was $0.18 when you wrote the option.<\/p>\n
4. A PUT OPTION you wrote on YYY stock has a strike price of $27.00.<\/p>\n
The put premium on the option was $0.12 when you wrote the option.<\/p>\n
5. A put option you are holding on ZZZ stock has a strike price of $80.00.<\/p>\n
The put premium on the option was $0.11 when you bought the option.<\/p>\n
George bought a European PUT OPTION contract in UWY stock from Julie with a<\/p>\n
striking price of $34.68 per share. He paid $0.67 per share for<\/p>\n
this option contract. The size of the contract was 100 shares.<\/p>\n
6. Suppose the market price of UWY stock was $32.84 per share at<\/p>\n
expiration. If the option was exercised at expiration, Julie would<\/p>\n
A. buy the PUT OPTION at $34.68 per share.<\/p>\n
B. sell the put option at $32.84 per share.<\/p>\n
C. buy a call option at $32.84 per share.<\/p>\n
D. buy UWY stock at $34.68 per share.<\/p>\n
E. buy UWY stock at $32.84 per share.<\/p>\n
F. sell UWY stock at $34.68 per share.<\/p>\n
G. sell UWY stock at $32.84 per share .<\/p>\n
7. Suppose the market price of UWY stock at expiration is $32.84. Assume<\/p>\n
that both George and Julie are rational in the sense that if they could<\/p>\n
choose to exercise the option, then they would do so rationally. Assume<\/p>\n
that neither George nor Julie have any UWY stock at expiration, nor do<\/p>\n
they want to hold any UWY stock so that they will buy or sell stock<\/p>\n
before or after any trading by the option to return to their zero<\/p>\n
holding of stock UWY. State the net profit per share that Julie would<\/p>\n
make on this option (If Julie loses money, show it as a negative<\/p>\n
number). The “net” means taking into account the premium on the option.<\/p>\n
8. Suppose that instead of $32.84, the market price of UWY stock at<\/p>\n
expiration is $35.99. Assume again the George and Julie are both<\/p>\n
rational and neither hold nor want to hold any UWY stock. State the net<\/p>\n
profit per share that Julie would make on this option.<\/p>\n
Suppose Gail buys a futures contract in oats from Sam at a price of<\/p>\n
$1.95 a bushel. An oats futures is for 5000 bushels.<\/p>\n
9. If the price of oats at expiration is $1.76 per bushel, what is Gail’s<\/p>\n
total profit on her futures contract? (Total profit is NOT profit per<\/p>\n
bushel.) (Also, assume there is no marking to market, even though in<\/p>\n
reality all futures contracts are marked to market.)<\/p>\n
10. Instead of the price of oats at expiration being $1.76 per bushel,<\/p>\n
assume it is $2.12 per bushel. Now what is Gail’s total profit<\/p>\n
on her futures contract?<\/p>\n","protected":false},"excerpt":{"rendered":"
Finance Derivatives Assume the current market prices for UUU, WWW, XXX, YYY, and ZZZ are $24.15, $7.50, $33.00, $25.68, and $83.98 respectively. Determine whether the following options are in, at, or out of the money. Let 1 be “in”, 0 Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-5763","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/5763","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=5763"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/5763\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=5763"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=5763"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=5763"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}