Use these points to fill in the table reviewing put and call options: (1pt each) Call...

 

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Use these points to fill in the table reviewing put and call options: (1pt each) Call Options Put Options 1. Price floor (minimum price) 2. Price ceiling (maximum price) 3. Prevent the price from falling too low 4. Prevents the price from raising to high 5. Will not pay a price above the maximum, but could pay a lower price 6. Will not get a price below the minimum, but could get a higher price 7. Rancher selling feeder cattle 8. Feedlot producer buying corn 9. A right to buy 10. A right to sell Practice with Buying vs Selling Options (1pt each) Calculate the gain or loss for both the buyer and the seller of an option. Consider the option seller as a "naked" option seller, only considering the loss from the option transaction. Note that the basis can be both positive and negative for the cash price, so consider that in your calculations. Put/Call Strike Price Example 14.20 Soybean Put Example 13.80 Soybean Call Lean Hog Put 85.00 Lean Hog Call 6.60 Premium Cash Price / Feeder 180.00 3.40 Cattle Put Corn Put Feeder 204 Cattle Call Corn Call 0.26 6.07 0.93 2.00 106.00 6.35 .47 9.80 Gain/Loss to Futures price at BUYER of expiration option 0.55 17.00 / 16.50 15.10 / 14.80 71.00/73.00 210.00/200.00 5.25/5.60 125.00/ 120.00 170.00/175.00 7.50/7.25 -0.26 +0= -0.26 No exercise gain 14.80-13.80= $1.00, $1.00-.93 = .07 exercise gain Option Buyer's Hedged Cash Price Sell @ 17.00-.26 =16.74 Buy@ 15.10-.07 =$15.03 Gain/Loss to WRITER (seller) of option +0.26 +0= +0.26 No Exercise loss +93 + (13.80- 14.80) = -.07 exercise loss Use these points to fill in the table reviewing put and call options: (1pt each) Call Options Put Options 1. Price floor (minimum price) 2. Price ceiling (maximum price) 3. Prevent the price from falling too low 4. Prevents the price from raising to high 5. Will not pay a price above the maximum, but could pay a lower price 6. Will not get a price below the minimum, but could get a higher price 7. Rancher selling feeder cattle 8. Feedlot producer buying corn 9. A right to buy 10. A right to sell Use these points to fill in the table reviewing put and call options: (1pt each) Call Options Put Options 1. Price floor (minimum price) 2. Price ceiling (maximum price) 3. Prevent the price from falling too low 4. Prevents the price from raising to high 5. Will not pay a price above the maximum, but could pay a lower price 6. Will not get a price below the minimum, but could get a higher price 7. Rancher selling feeder cattle 8. Feedlot producer buying corn 9. A right to buy 10. A right to sell Practice with Buying vs Selling Options (1pt each) Calculate the gain or loss for both the buyer and the seller of an option. Consider the option seller as a "naked" option seller, only considering the loss from the option transaction. Note that the basis can be both positive and negative for the cash price, so consider that in your calculations. Put/Call Strike Price Example 14.20 Soybean Put Example 13.80 Soybean Call Lean Hog Put 85.00 Lean Hog Call 6.60 Premium Cash Price / Feeder 180.00 3.40 Cattle Put Corn Put Feeder 204 Cattle Call Corn Call 0.26 6.07 0.93 2.00 106.00 6.35 .47 9.80 Gain/Loss to Futures price at BUYER of expiration option 0.55 17.00 / 16.50 15.10 / 14.80 71.00/73.00 210.00/200.00 5.25/5.60 125.00/ 120.00 170.00/175.00 7.50/7.25 -0.26 +0= -0.26 No exercise gain 14.80-13.80= $1.00, $1.00-.93 = .07 exercise gain Option Buyer's Hedged Cash Price Sell @ 17.00-.26 =16.74 Buy@ 15.10-.07 =$15.03 Gain/Loss to WRITER (seller) of option +0.26 +0= +0.26 No Exercise loss +93 + (13.80- 14.80) = -.07 exercise loss Practice with Buying vs Selling Options (1pt each) Calculate the gain or loss for both the buyer and the seller of an option. Consider the option seller as a "naked" option seller, only considering the loss from the option transaction. Note that the basis can be both positive and negative for the cash price, so consider that in your calculations. Put/Call Strike Price Example 14.20 Soybean Put Example 13.80 Soybean Call Lean Hog Put 85.00 Lean Hog Call 6.60 Premium Cash Price / Feeder 180.00 3.40 Cattle Put Corn Put Feeder 204 Cattle Call Corn Call 0.26 6.07 0.93 2.00 106.00 6.35 .47 9.80 Gain/Loss to Futures price at BUYER of expiration option 0.55 17.00 / 16.50 15.10 / 14.80 71.00/73.00 210.00/200.00 5.25/5.60 125.00/ 120.00 170.00/175.00 7.50/7.25 -0.26 +0= -0.26 No exercise gain 14.80-13.80= $1.00, $1.00-.93 = .07 exercise gain Option Buyer's Hedged Cash Price Sell @ 17.00-.26 =16.74 Buy@ 15.10-.07 =$15.03 Gain/Loss to WRITER (seller) of option +0.26 +0= +0.26 No Exercise loss +93 + (13.80- 14.80) = -.07 exercise loss

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Heres the completed table Put Options Call Options 1 Price floor minimum price 1 Price ceiling maxim... View the full answer