Question

The price of a stock is $39, and a six-month call with a strike price of $35 sells for $8.
a. What is the option's intrinsic value?
b. What is the option's time premium?
c. If the price of the stock rises, what happens to the price of the call?
d. If the price of the stock falls to $36, what is the maximum you could lose from buying the call?
e. What is the maximum profit you could earn by selling the call uncovered (naked)?
f. If, at the expiration of the call, the price of the stock is $35, what is the profit (or loss) from buying the call?
g. If, at the expiration of the call, the price of the stock is $35, what is the profit (or loss) from selling the call naked?
h. If, at the expiration of the call, the price of the stock is $46, what is the profit (or loss) from buying the call?
i. If, at the expiration of the call, the price of the stock is $46, what is the profit (or loss) from selling the call naked?


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  • CreatedMarch 19, 2015
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