Q10

1. Consider a call option on BMI Corp. with a strike price of $110 and a premium of $2.25. What is the profit or loss on the call just prior to expiration if the stock price is $106?

$_______________

Place your answer in dollars and cents without a dollar sign. Denote answers that are less than zero with a minus sign in front of the number. For example, and answer of negative 4 dollars would be entered as -4.

2. Kingfish has call options trading with a strike price of $74 and a premium of $10. Determine the profit/loss to the WRITER of the call option if at the time of expiration the stock price is $51.

$_________________

Place your answer with dollars and cents without a dollar sign. Enter negative answers with a "minus" sign. For example, if your answer is negative two dollars and seventy five cents, then enter -2.75.

3.Bluefish has a put option that trades with a strike price of $64. The put option premium is $11. Determine the profit/loss on one Bluefish put option if at the option's expiration the stock price is $53.

$________________

Place your answer with dollars and cents without a dollar sign. Enter negative answers with a "minus" sign. For example, if your answer is negative two dollars and seventy five cents, then enter -2.75.

4. Bluefish has a put option that trades with a strike price of $62. The put option premium is $12. Determine the profit/loss on WRITING one Bluefish put option if at the option's expiration the stock price is $58.

$________________

Place your answer with dollars and cents without a dollar sign. Enter negative answers with a "minus" sign. For example, if your answer is negative two dollars and seventy five cents, then enter -2.75.

5. A call option on MassComputer Corp. is trading with a strike price of $100 and an expiration date on November 18th at 4 pm in the afternoon. The premium paid on the call is $7.55. What is the net profit or loss from buying the call just prior to 4 pm on November 18 if at this time the stock price per share of MassComputer is:

a.$110.72

Answer:The net profit is $_____________

b.$88.85

Answer:The net profit is $_______________

Place your answers in dollars and cents. Negative answers should use the minus sign. For example, the answer of minus two dollars and twenty cents would be placed as -2.20.

6. IBM corporation is selling at $40.13 per share, and call options begin trading with many different strike prices and expiration dates. What is the minimum value that the premium of any of these call options can take?

Answer: $______________

Place your answer in dollars and cents.

7. MassGlass Corporation is a firm with $90 million in equity and $25 million in debt. The debt has maturity of 5 years. If we view the equity of this firm as a call option, then we can evaluate this option as one whose exercise price is $_______

million, whose time to expiration is ______________

years, and whose underlying asset has a value of $____________

million.

*DO NOT USE COMMA OR DOLLAR SIGN OR PERCENT SIGN IN YOUR ANSWER.

8. Options trade on the common stock of Taz, Inc. that have a strike price of $50.50and a premium of $2.00. In each of the next four parts, calculate the net profit (or loss) on the option position.

Note: Negative responses should be placed with a preceding negative sign (e.g. -4.50) and not with parentheses (e.g. (4.50)).

Part 1: Calculate the net profit or loss from BUYING a CALL option on Taz if at the time of expiration the price per share of Taz is $50.00. $______

Part 2: Calculate the net profit or loss from WRITING a CALL option on Taz if at the time of expiration the price per share of Taz is $50.00. $_____

Part 3: Calcuate the net profit or loss from BUYING a PUT option on Taz if at the time of expiration the price per share of Taz is $50.00. $______

Part 4: Calcuate the net profit or loss from WRITING a PUT option on Taz if at the time of expiration the price per share of Taz is $50.00. $_____

9. Part (1) Option Quotations for the M&B Corporation are listed as follows:

.............................................CALL.............PUT

Closing.....Strike....EXP...Premium.....Premium

50.4............48.5......Jul........2.40...........0.100

50.4............48.5......Sep......2.65...........0.250

50.4............53.5......Aug......0.500.........3.80

50.4............58.5......Oct.......0.700.........9.00

50.4............63.5......Jun.....1.00............14.2

Closing represents the closing price per share of M&B on a particular trading day.

Is the September (Sep) call option in-the-money or out-of-the-money?__________(answer with the word IN or the word OUT)

Is the June (Jun) put option in-the-money or out-of-the-money?__________ (answer with the word IN or the word OUT)

Part (2) How much would it cost in premiums to invest in an October (OCT) straddle on M&B? $_________

Place your answer in dollars and cents without a dollar sign.