Use the option quote information shown here to answer the questions that follow. a. Suppose you buy
Question:
Use the option quote information shown here to answer the questions that follow.
a. Suppose you buy 10 contracts of the February 120 call option. How much will you pay, ignoring commissions?
b. In part (a), suppose that Macrosoft stock is selling for $140 per share on the expiration date. How much is your options investment worth? What if the terminal stock price is $125? Explain.
c. Suppose you buy 10 contracts of the August 120 put option. What is your maximum gain? On the expiration date, Macrosoft is selling for $114 per share. How much is your options investment worth? What is your net gain?
d. In part (c), suppose you sell 10 of the August 120 put contracts. What is your net gain or loss if Macrosoft is selling for $113 at expiration? For $132? What is the break-even price, that is, the terminal stock price that results in a zero profit?
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9780072553079
6th Edition
Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan