Problem 24-2 Understanding Option Quotes [LO1]

Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $70.

						Calls						Puts
				Strike
Option	Expiration			Price		Vol.			Last			Vol.			Last
RWJ		Mar		65			240			4.20			170			4.30
		Apr		65			180			10.05			137			9.05
		Jul		65			149			10.90			53			12.35
		Oct		65			70			11.80			21			11.45

a-1

Are the call options in or out of the money?

	In the money
	Out of the money

a-2	What is the intrinsic value of an RWJ Corp. call option?

Intrinsic value

$

b-1

Are the put options in or out of the money?

	In the money
	Out of the money

b-2	What is the intrinsic value of an RWJ Corp. put option?

Intrinsic value

$

c-1	Two of the options are clearly mispriced. Which ones?

	Mar call

	Apr call

	Oct call

	Mar put

	Oct put

Apr put

c-2	What is the arbitrage profit you could make on each of the mispriced options? (Round your answers to 2 decimal places, e.g., 32.16.)

Mispriced option	Profit

$

$