Share
Explore BrainMass

Call and Put Option Contracts

Use the options quote information shown here to answer the questions that follow. The stock is currently selling for $114.
Calls Puts
Option and NY Close - Expiration -Strike Price - Vol. Last - Vol. Last

Macrosoft
Feb 110 85 7.60 40 .60
Mar 110 61 8.80 22 1.55
May 110 22 10.25 11 2.85
Aug 110 3 13.05 3 4.70

a. Suppose you buy 10 contracts of the Feb 110 call option. How much will you pay, ignoring commissions.

b. In part (a), suppose that Macrosoft stock is selling for $1.40 per share on the expiration date. How much is your options investment worth? What if the terminal stock price is $125? Explain.

c. Suppose you buy 10 contracts of the Aug 110 put option. What is your maximum gain? On the expiration date, Macrosoft is selling for $104 per share. How much is your options investment worth? What is your net gain?

d. In part (c), suppose you sell 10 of the Aug 110 put contracts. What is your net gain or loss if Macrosoft is selling for $103 at expiration? For $132? What is the break-even price - that is, the terminal stock price that results in a zero profits?

Solution Preview

Please see the attached file
Use the options quote information shown here to answer the questions that follow. The stock is currently selling for $114.
                                                    Calls          Puts
Option and NY Close  -  Expiration  -Strike Price - Vol. Last - Vol. Last

Macrosoft
                         Feb           110           85    7.60   40   .60
                         Mar           110           61    8.80   22  1.55
                         May           110           22   10.25   11  2.85
                         Aug           110            3   13.05    3  4.70

a. Suppose you buy 10 contracts of the Feb 110 call option. How much will you pay, ignoring commissions

Calls Puts
Expiration   Strike Price Vol. Last Vol. Last
Feb           110           85     7.6 40   0.6
Mar           110           61     8.8 22   1.55
May           110           22   10.25 11   2.85
Aug           110             3   13.05  3   4.7

Price of call option= $7.60 per share
Number of shares per contract= 100
Number of contracts= 10

Amount paid for 10 contracts= $7,600 =10 x 100 x ...

Solution Summary

Answers questions based on quotations for call and put option contracts.

$2.19