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ou bought a call option with a strike price of $25 and a put option with a strike price of $30 on Google stocks that are currently selling at $35 a share. The call option is trading at $4.50 and put option price is $2.50. (5 marks each, 15 marks)

A. Are your call and put options in the money, at the money, or out of money?

B. Calculate the Exercise price of each of the call and put.

C. What is the time value of each of your call and put options?

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Irving Heathcote
Irving HeathcoteLv2
28 Sep 2019

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Assume the current market prices for UUU, WWW, XXX, YYY, and ZZZ are

$27.15, $3.82, $34.32, $29.00, and $80.08 respectively. Determine whether

the following options are in, at, or out of the money. Let 1 be "in",

0 be "at", and -1 be "out".

1. A put option you are holding on UUU stock has a strike price of $27.00.

The put premium on the option was $0.16 per share when you bought it.

2. A call option you are holding on WWW stock has a strike price of $4.00.

The call premium on the option was $0.21 per share when you bought it.

3. A call option you wrote on XXX stock has a strike price of $33.00.

The call premium on the option was $0.20 when you wrote the option.

4. A put option you wrote on YYY stock has a strike price of $29.00.

The put premium on the option was $0.19 when you wrote the option.

5. A put option you are holding on ZZZ stock has a strike price of $80.00.

The put premium on the option was $0.16 when you bought the option.

Regarding option Greeks, which of the following statements are true and why?

(i) Theta for a call option is negative.

(ii) Gamma is the same for a call and a put with same strike price and time to expiry.

(iii) Vega is maximal for at-the-money options.

(iv) Rho for a call option is positive.

(v) Psi increases for a put option as time to expiration increases

1. Consider a call option with an exercise price of $35 and an expiration date in December and a put option with an exercise price of $35 and an expiration date also in December, both on a stock that is currently selling for $37 per share. Calculate how much these options are in or out of the money.

2. Suppose that both a call option and a put option have been written on a stock with an exercise price of $40. The current stock price is $42, and the call and put premiums are $3 and $0.75, respectively. Calculate the profit to the long and short positions for both the put and the call with an expiration day stock price of $30 and with a price at expiration of $45.

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