Please answer the following questions:
1. You are provided with the following options quote from CBOE:
a) What is the current stock price?
b) What is the immediate payoff if the $31 strike, October Call Option is exercised right now?
c) What is the immediate payoff if the $31 strike, October Put Option is exercised right now?
d) Why is the call option cheaper if the exercise price is higher?
e) Why is a put option more expensive if the exercise price is higher?
2. You are provided with the following options quote from CBOE:
a) Construct a covered call using the $96.5 strike option and graph the profits at expiration.
b) Construct a Bull Spread using the $94 and $97 call options and graph the profits at expiration.
c) Suppose the risk-free interest rate is 0.11%, and the options expire on March 18, 2016, verify whether the put-call parity holds for the $96 strike options. (The condition holds if the condition is within $1 difference then arbitrage is not possible due to transactions costs.)
Attachment:- Assignment Files.rar