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Options: Strike Price, Intrinsic Value, and Speculative Premium

2. Look at the option quotes in Table 15-2. (see attached)
a. What is the closing price of the common stock of SINGLE Systems?
b. What is the highest strike price listed?
c. What is the price of a December 20 call option?
d. What is the price of a January 22.50 put option?

3. Assume a stock is selling for $66.75 with options available at 60,065, and 70 strike prices. The 65 call option price is at $4.50.
a. What is the intrinsic value of the 65 call?
b. Is the 65 call in the money?
c. What is the speculative premium on the 65 call option?
d. What percentage does the speculative premium represent of common stock price?
e. Are the 60 and 70 call option in the money?

Problem

1. You purchase a 5,000-bushel contract for corn at $1.90 per bushel ($9,500 total). The initial margin requirement is 7 percent. The price goes up to $1.98 in one month. What is your percentage profit and the annualized gain?

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2. Look at the option quotes in Table 15-2. (see attached)

Table 15-2 SINGLE Systems Prices on November 8
Stock Strike CALLS-LAST PUTS-LAST
Price Price December January April December January April
$18.93 $15.00 $4.20 $4.50 n/a $0.40 $0.65 n/a
18.93 17.50 2.40 2.80 n/a 1.05 1.40 n/a
18.93 20.00 1.10 1.50 $2.50 2.20 2.60 $3.40
18.93 22.50 0.40 0.70 1.60 3.70 4.20 5.00
18.93 25.00 n/a 0.30 1.10 n/a 6.30 7.10

a. What is the closing price of the common stock of SINGLE Systems?

$18.93

b. What is the highest strike price ...

Solution Summary

Questions on futures and options are answered.

$2.19