Briefly explain how you would make money on (a) a call option and (b) a put option. Do you have to exercise the option to capture the profit?
Answer to relevant QuestionsHow do you find the intrinsic (fundamental) value of a call? Of a put? Does an out-of-the- money option have intrinsic value? Assume you hold a well-balanced portfolio of common stocks. Under what conditions might you want to use a stock-index (or ETF) option to hedge the portfolio? a. Briefly explain how such options could be used to hedge a ...Verizon is trading at $36. Put options with a strike price of $45 are priced at $10.50. What is the intrinsic value of the option, and what is the time value? What is a futures contract? Briefly explain how it is used as an investment vehicle. Briefly define each of the following: a. Settlement price b. Daily price limit c. Open interest d. Maximum daily price range e. Delivery month
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