Both a call and a put currently are traded on stock XYZ; both have strike prices of $50 and expirations of 6 months. What will be the profit to an investor who buys the call for $4 in the following scenarios for stock prices in 6 months? What will be the profit in each scenario to an investor who buys the put for $6?
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Prevailing stock price
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Value of call at expiration
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Initial cost
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Profit
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a.
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$40
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b.
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$45
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c.
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$50
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d.
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$55
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e.
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$60
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Prevailing stock price
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Value of put at expiration
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Initial cost
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Profit
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a.
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$40
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b.
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$45
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c.
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$50
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d.
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$55
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e.
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$60
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Use the figures attached showing the prices of various IBM options to calculate the payoff and the profits for investments in each of the following February maturity options, assuming that the stock price on the maturity date is $105.
a. Call option, K = $100
b. Put option, K = $100
c. Call option, K = $105
d. Put option, K = $105
e. Call option, K = $110
f. Put option, K = $110