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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Given the following information,
Price of a stock …………………$101
Strike price of a six-month call …………………$100
Market price of the call …………………$5
Strike price of a six-month put …………………$100
Market price of the put …………………$4
Answer the following sentences.
a) Which option is ?oin?? the money?
b) What is the time premium paid for the put?
c) If an investor establishes a naked call position, what amount is received?
d) What is the most the buyer of the call can lose?
e) What is the maximum amount a short seller (of the stock) can lose?
At the expiration of the options (i.e., after six months have elapsed), the price of the stock is $93.
f) What is the profit (loss) from buying the stock?
g) What is the profit (loss) from buying the call?
h) What is the profit (loss) from writing the call covered?
i) What is the profit (loss) from selling the put?
j) At expiration, what time premium is paid for the call?
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