33:390:310 Lecture Notes - Lecture 24: Call Option
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73 : together, put and calls wash each other out, the most you can lose when is the premium. The reward is technically infinite though: call value should never be at zero (cant buy and option for zero since you had to put something in for the premium) If you buy a put, you want that stock to go down. Sell the put, and price goes to 0 you owe the difference. Expiration date- the close of business on that day (usually fridays, sometimes tuesdays) Premium- the amount a buyer pays, and the amount a seller receives. Upper bound: call price must be less than or equal to the stock price must be on the ____////// part. Company gives employees more stock than an employee would regularly buy. Gets people on board bc the employees would want it to go up too. So many people get them so it has less influence than what people think.
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Related Questions
Looking at the following options table:
British Pound Option Prices (U.S. CENTS per Pound, 62,500 pounds per contract) | ||||||||
US cents/£ | Call | Call | Call | Put | Put | Put | ||
Spot Rate | Strike Price | May | June | July | May | June | July | |
144.8 | 144 | 0.88 | 1.42 | 1.44 | 0.52 | 1.06 | ----- | |
144.8 | 145 | 0.42 | 1.02 | ----- | ----- | ----- | ----- | |
144.8 | 146 | 0.2 | 0.68 | 0.72 | 1.75 | 2.32 | ----- |
QUESTION A: | Give me one example of an option that is out of the money? Be specific as far as month and strike price. Explain your answer? | |||||||
QUESTION B: | Give me one example of an option that is in the money? Be specific as far as month and strike price. Explain your answer? | |||||||
QUESTION C: | Which, if any, option is at the money? Explain your answer. | |||||||
QUESTION D: | Looking at the July 144 CALL option, break down the option's premium into its Intrinsic Value and Time Premium components | |||||||
Show your calculations. | ||||||||
QUESTION E: | Looking at the June 146 PUT option, break down the options premium into its Intrinsic Value and Time Premium components | |||||||
Show your calculations. | ||||||||
QUESTION F : | If you purchase two (2) June 145.0 call options what will be the total amount of your premium that you need to pay? | |||||||
QUESTION G: | Referring to QUESTION F, when do you pay the option premium, on the settlement date or on the date that you purchase the options? | |||||||
QUESTION H: | Today you purchase three (3) June 144.0 Puts. On settlement date the spot rate = 142.5 cents per pound, what is your net profit/loss? | |||||||
Show your calculations. | ||||||||
QUESTION H: | Today you purchase two (2) June 144.0 Calls. On settlement date the spot rate = 143.5 cents per pound, what is your net profit/loss? |