A. calculate the payoff and profit at expiration for the february 190 calls, if you purchase the option at the stated price and
at expiration the stock price is $195.
b. calculate the payoff and profit at expiration for the february 195 puts, if you purchase the option at the stated price and at expiration the stock price is $195.
b. calculate the payoff and profit at expiration for the february 195 puts, if you purchase the option at the stated price and at expiration the stock price is $195.
1 answer:
Answer:
(a) The Net Payoff: 6.75+5 = - 1.75 (b) Net payoff : 5
Note: Kindly find an attached image to the solution below
Sources: The image was researched from Course hero
Explanation:
Solution
Given that:
The call value goes higher when the underlying price increases and vice versa.
The premium value of put goes higher when underlying market decreases and vice versa.
The call value = Spot price - strike price (minimum zero)
The put value = Strike price - spot price (minimum zero
(1): Trade: Buy February Call
Now
The Strike Price: $ 190
The Call Premium paid: $ 6.75
The Stock Price on Expiry: $ 195
Value of call on expiry: $ 5
The Net Payoff: 6.75+5 = - 1.75
(2). Trade: Buy February Put
The Strike Price: $195
Put Premium: $ 5.00
Stock Price on Expiry = $ 195
Value of Put on Expiry: 0
Net payoff : 5
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