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Options Pricing

See attached file for full problem description.

summary of options purchased at beginning of 4th quarter with 3 months to expiration (european style options)

position shares premium strike price
long calls 63,000 $20.45 $110
long puts 63,000 $13.15 $110

beginning end
4th Quarter 4th Quarter
underlying stock price $111 $109

assumptions when buying options:expected fairly major movement in the stock price

need to compare versus historical volatility of underlying stock
does the historical data support the view of what the options were worth?
do the prices of other call and put options trading at that time reflect the same level of volatility that was forecasted?
need to use binomial pricing model and black-scholes to validate answers


Solution Summary

Answer to a question on option pricing using Black Scholes.