Turn back to Figure and look at the Intel options. Suppose you buy a November expiration call
Question:
a. Suppose the stock price in November is $21.75.Will you exercise your call? What is the profit on your position?
b. What if you had bought the November call with exercise price $22?
c. What if you had bought a November put with exercise price$22?
PRICES AT CLOSE, OCT 14, 2009 Intel (INTC) Call ast Volume Open Interest Underlying stock price: 20.8:3 Put ast Volume Open Interest Expiration Strike Oct 2009 20.00 0.84 Nov 2009 20.00 1.21 Jan 2010 20.00 1.66 Apr 2010 20.00 2.10 Oct 2009 21.00 0.17 Nov 2009 21.00 0.64 23848 Jan 2010 21.00 1.11 Apr 2010 21.00 1.58 Oct 2009 22.00 0.02 Nov 2009 22.00 0.30 Apr 2010 22.00 1.15 36929 101414 0.03 30765 0.52 1275180.98 4990 1.50 8897 7979 3376 414 93413 0.33 21907 6407 2440 1355 2048 959 52083 4709 684 77484 22091 2073 10327 25995 2213 25003 0.94 34338 1.41 6063 1.98 107054 1.22 273731.63 60439 7701 8582 3967 4235 828 6865 762 191 2679
Step by Step Answer:
a Since the stock price exceeds the exercise price y...View the full answer
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Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
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