Use the option quote information on Ageas from Euronext Liffe shown here to answer the questions that follow.

(a) Suppose you buy 20 contracts of the June €1.50 call option. How much will you pay, ignoring commissions?

(b) In part (a), suppose that Ageas equity is selling for €1.70 per share on the expiration date. How much is your options investment worth? What if the terminal share price is €1.35? Explain.

(c) Suppose you buy 10 contracts of the June €1.20 put option. What is your maximum gain?
On the expiration date, Ageas is selling for €1.14 per share. How much is your options investment worth? What is your net gain?

(d) In part (c), suppose you sell 10 of the June €1.20 put contracts. What is your net gain or loss if Ageas is selling for €1.14 at expiration? For €1.32? What is the break-even price – that is, the terminal share price that results in a zero profit?

Transcribed Image Text:

Codes and Classification Code FOR Exercise American Currency Type Underlying Name ISIN Currency Best Bid Time Last Volume 70,649,448 High Settl. 0.28 0.11 0.06 0.03 0.02 FORTIS CET June 2012 Prices - 13/04/12 Market NYSE Liffe Amsterdam Vol. O.I Calls 1,300 110 Day O.I. Vol Last 1,191 759 20 - - - BE0003801181 1.493 1.68 Bid Ask 0.25 0.29 0.10 0.12 0.05 0.08 0.02 0.05 C 0.04 Strike 1.20 1.40 1.50 1.60 1.70 Market Best Ask Bid Ask P 0.03 0.05 P 0.09 0.12 P 0.15 0.18 P 0.21 0.26 P 0.29 0.35 125 13/04/12 507,670 12/04/12 Last Change % 14.93 Low 1.332 Euronext Amsterdam Last EXTENDED VIEW Puts Day Vol