Turn back to Figure 2.10 and look at the IBM options. Suppose you buy a January 2013 expiration call option with exercise price $180.

a. Suppose the stock price in January is $193. Will you exercise your call? What is the profit on your position?

b. What if you had bought the January call with exercise price $185?

c. What if you had bought a January put with exercise price $185?

Figure 2.10

Transcribed Image Text:

PRICES AT CLOSE, July 17, 2012 IBM (IBM) Underlying stock price: 183.65 Call Put Expiration Strike Last Jul Au Oct Jan Jul Au Oct Jan ume Open Interest 180.00 5.50 180.00 6.85 180.00 9.70 180.00 12.58 185.00 2.80 185.00 4.10 185.00 6.99 185.00 9.75 620 406 184 52 2231 656 843 135 ast 1998 2.11 2105 3.70 4246.85 2372 10.25 3897 4.20 2656 6.26 969 9.10 3156 12.01 3080 847 245 76 2725 634 783 243 ume Open Interest 8123 3621 4984 3196 7370 3367 2692 10731