FIN 501 Chapter Notes - Chapter 15: Option Style, Call Option, Strike Price
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23 Jun 2014
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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? |