Essay About X-S And Net Profit

Fin 321 – Fall 2016 – Homework 3
The intrinsic value of a CALL option: Max (S-X, 0) = Max (77-70,0) = $7 per share.Net profit for LONG CALL is [Max (S-X,0)-Premium]*100 shares*# of contracts = [Max(77-70,0)-4]*100*11 = $3,300.The intrinsic value of a PUT option: Max (X-S,0) = max (40-34,0)=$6 per share.Net profit for LONG PUT is [Max(X-S,0)-premium]*100 shares*# of contracts=[Max(40-34,0)-2.70]*100*13 = $4,29025 contracts at $1,068 per contract (10.68*100 shares per contract)= $26,700Options worth/value = intrinsic value = Max(S-X,0)Stock price = $106.30: option value = 50(100)($106.30 − 100) = $31,500Stock price = $102.20: option value = 50(100)($102.20 − 100) = $11,000         Net profit/loss for a LONG PUT = [MAX(X-S,0)-premium]*100*# of contracts. This long put will have the maximum gain when Max(X-S,0) has the biggest value (i.e. S=0).         When S=0, maximum gain is [Max(100-0,0)-4.90]*100*35 = $332,850Options worth = intrinsic value for a put = Max(X-S, 0) = Max (100-84.75) = $15.25 per share.Net gain (net profit/loss) = [MAX(X-S,0)-premium]*100*# of contracts = [Max(100-84.75,0)-4.90]*100*35 = $36,225.a. Net gain/loss for a SHORT PUT = [-Max(X-S,0)+premium]*100*# of contracts.When S=92, net gain/loss = [-Max(100-92,0)+2.40]*100*60 = -$33,600When S=116, net gain/loss = [-Max(100-116,0)+2.40]*100*60 = $14,400Breakeven price for PUT = X-Premium = 100 – 2.4 = $97.60Net gain/loss for a SHORT CALL = [-Max(S-X,0)+premium]*100*#of contractsWhen S=40, net gain/loss = [-Max(40-50,0)+4.26]*100*28= $11,928When S=50, net gain/loss = [-Max(50-50,0)+ 4.26]*100*28 = $11,928When S=60, net gain/loss = [-Max(60-50,0)+ 4.26]*100*28 = -$16,072.Net gain/loss for a SHORT PUT = [-Max(X-S,0)+premium]*100*# of contractsWhen S=60, net gain/loss = [-Max(70-60,0)+2.40]*100*34 = -$25,840.When S=70, net gain/loss = [-Max(70-70,0)+2.40]*100*34 = $8,160.When S=80, net gain/loss = [-Max(70-80,0)+2.40]*100*34= $8,160.