Assume Apple is currently selling for $170 dollars a share. You write an April expiration call option on Apple with exercise price $180. You also write an April put option with an exercise price of $160.
A) What kind of âbetâ are you making? (What do you believe/hope will happen to Apple's stock price?)
B) At what final (April expiration) Apple price will you maximize your gain?
Assume Apple is currently selling for $170 dollars a share. You write an April expiration call option on Apple with exercise price $180. You also write an April put option with an exercise price of $160.
A) What kind of âbetâ are you making? (What do you believe/hope will happen to Apple's stock price?)
B) At what final (April expiration) Apple price will you maximize your gain?
Related questions
Consider the following option portfolio: You write a January 2012 expiration call option on IBM with exercise price $168, and the price of the call option is $8.93. You also write a January expiration IBM put option with exercise price $163, the price of the put option is $10.85.
Instructions: for parts a, b, and c, enter your answer as a decimal rounded to the nearest cent.
a. What will be the profit/loss on this position if IBM is selling at $157 on the option expiration date? $
b. What will be the profit/loss on this position if IBM is selling at $172 on the option expiration date? $
c. At what two stock prices will you just break even on your investment (i.e., zero net profit)?
For the put, this requires that: $
For the call this requires that: $
d. What kind of âbetâ is this investor making; that is, what must this investor believe about IBMâs stock price in order to justify the position?
| betting that the IBM stock price will go up. | |
| betting that the IBM stock price will go down. | |
| betting that the IBM stock price will have low volatility. | |
| betting that the IBM stock price will have high volatility. |
