There is a European call option on the stock of TSLA with a strike price of $900. The cost of the option today is $2.56 (recall that 1 option contract is for 100 shares).

1. If you buy the option today and wait until expiration, compute the payoff and the profit if the price of TSLA is $1000 at expiration.
2. If you buy the option today and wait until expiration, compute the payoff and the profit if the price of TSLA is $800 at expiration.
3. If you sell the option today and wait until expiration, compute the payoff and the profit if the price of TSLA is $1000 at expiration.
4. If you sell the option today and wait until expiration, compute the payoff and the profit if the price of TSLA is $800 at expiration.

There is a European put option on the SPY (an ETF tracking the S&P500) with a strike price of $420. The cost of the option today is $1.16 (recall that 1 option contract is for 100 shares).

1. If you buy the option today and wait until expiration, compute the payoff and the profit if the price of SPY is $520 at expiration.
2. If you buy the option today and wait until expiration, compute the payoff and the profit if the price of SPY is $410 at expiration.
3. If you sell the option today and wait until expiration, compute the payoff and the profit if the price of SPY is $520 at expiration.
4. If you sell the option today and wait until expiration, compute the payoff and the profit if the price of SPY is $410 at expiration.

Answer rating: 100% (QA)

European Call Option on TSLA Buy the option today and wait until expiration TSLA 1000 at expiration ... View the full answer