1. Suppose you buy 100 shares of ABC at $70. Create a covered call position using an option contract with a strike price of $80 currently selling at $3.00. Make a spreadsheet and draw a profit/loss diagram and label all significant points for this strategy. What is the payoff to this position if it is closed out at expiration when the stock is selling for $85?

2. XYZ Inc.'s JUN 300 calls ($3 1/4 each), JUN 305 calls ($1 1/2), and JUN 310 calls ($ 1/2) are all available to you. Construct a butterfly spread and show (a) the maximum possible gain and (b) the maximum possible loss and the break-even point. What is the gain or loss if, at expiration, the underlying security sells for exactly $303?

3. Suppose you buy 100 shares of ABC at $79.25 and simultaneously write a March 80 Straddle at the prices given below. Make a spreadsheet and draw a profit/loss diagram and label all significant points for this strategy.

March 80 call at $1.625
March 80 put at $3.50

4. Explain why writing covered calls and writing puts are generally equivalent strategies. Demonstrate with an example.

5. Using the following prices, answer the questions listed below.

CALLS PUTS

EP FEB MAY AUG FEB MAY AUG
JJ 25 3 4 1/4 5 1/2 2 2 1/2 3 3/4
27 1/2 30 1 1 7/8 2 1/2 3 1/8 3 3/4 4 5/8
27 1/2 35 1/8 3/4 1 1/4 7 1/2 8 8

Construct a call bull spread using the May contracts. Show the maximum profit/loss under both strategies. What is the return on investment if the stock is selling at expiration for $33.25? (Ignore transaction costs.)

An investor has many choices that need to be made before investing his/her money. Identify five strategies that need to be reviewed before an investor can reach his/her personal goals. Discuss the advantages and disadvantage to each strategy.

AD 8: The price of a stock is $50. The price of a one-year European put option on the stock with a strike price of 42 is quoted as $8 and the price of a one-year European call option on the stock with a strike price of 58 is quoted as $6.
Q1: Suppose that an investor buys 100 shares (one round lot), shorts 1 call option contr

Need help with assignment.
A stock is currently selling for $25. A 6-month call option on the stock has a strike price of $30 and sells for $0.50. Calculate the exercise value of the option?
$0.00
$4.50
$5.00
$24.50
none of the above
Which of the following is not a real option?
The option to switch the type of ve

8-1
A call option on Bedrock Boulders stock has a market price of $7. The stock sells for $30 a share and the option has an exercise price of $25 a share.
a. What is the exercise value of the call option?
b. What is the premium on the option?
8-3
Assume that you have been given the following information on Purcell I

OK, please correct me if I am wrong, but a put option is when your stock is sold automatically when the price drops below a certain level.
a call is the option to purchase stock at a given price.
If you have the amount that a put option would cost - how would you figure out what a call option would cost?
3 month put optio

5) Binomial Option Pricing: Suppose we live in a 3 period Black-Scholes world, t=0,1,2 whichidentify as follows. There is a stock with price S(0)= 1 in period 0.In each period , t=1,2, the price can either go up to u. S or down to d.S.
Suppose u=1.2 and d=0.9. Suppose that the interest rate is constant at 4%.
A) What i

Assume you have been given the following information on Purcell Industries:
Current stock price = $15 Strike price of option = $15
Time to maturity of option = 6 months Risk-free rate = 6%
Variance of stock return = 0.12 d1 = 0.24495
d2 = 0.00 N(d1) = 0.59675
N(d2) = 0.5000
Using

Using the case study Rick Thompsonâ€™s Stock Investment: Options (9A99N009):
How do the three proposed optionstrategies compare? Why might you choose one strategy versus another?

1) AKX stock is currently trading at $50 today and in one period will either be worth 20% more or 20% less. The risk-free rate is 4%. What is the value of an at the money call option?
A. $5.77
B. $6.00
C. $6.67
D. $10.00
E. $20.00