call and put option quiz - solution
DESCRIPTION
derivativesTRANSCRIPT
1st Position - Long on Call Option (Strike Price: 115, Premium: 12)2nd Position - Long on Put Option (Strike Price: 110, Premium: 8)
Call Position Put Position
60 -12 115 60 NO 0 -12 -8 110 60 YES62 -12 115 62 NO 0 -12 -8 110 62 YES64 -12 115 64 NO 0 -12 -8 110 64 YES66 -12 115 66 NO 0 -12 -8 110 66 YES68 -12 115 68 NO 0 -12 -8 110 68 YES70 -12 115 70 NO 0 -12 -8 110 70 YES72 -12 115 72 NO 0 -12 -8 110 72 YES74 -12 115 74 NO 0 -12 -8 110 74 YES76 -12 115 76 NO 0 -12 -8 110 76 YES78 -12 115 78 NO 0 -12 -8 110 78 YES80 -12 115 80 NO 0 -12 -8 110 80 YES82 -12 115 82 NO 0 -12 -8 110 82 YES84 -12 115 84 NO 0 -12 -8 110 84 YES86 -12 115 86 NO 0 -12 -8 110 86 YES88 -12 115 88 NO 0 -12 -8 110 88 YES90 -12 115 90 NO 0 -12 -8 110 90 YES92 -12 115 92 NO 0 -12 -8 110 92 YES94 -12 115 94 NO 0 -12 -8 110 94 YES96 -12 115 96 NO 0 -12 -8 110 96 YES98 -12 115 98 NO 0 -12 -8 110 98 YES100 -12 115 100 NO 0 -12 -8 110 100 YES102 -12 115 102 NO 0 -12 -8 110 102 YES104 -12 115 104 NO 0 -12 -8 110 104 YES106 -12 115 106 NO 0 -12 -8 110 106 YES108 -12 115 108 NO 0 -12 -8 110 108 YES110 -12 115 110 NO 0 -12 -8 110 110 NO112 -12 115 112 NO 0 -12 -8 110 112 NO114 -12 115 114 NO 0 -12 -8 110 114 NO116 -12 115 116 YES 1 -11 -8 110 116 NO118 -12 115 118 YES 3 -9 -8 110 118 NO120 -12 115 120 YES 5 -7 -8 110 120 NO122 -12 115 122 YES 7 -5 -8 110 122 NO124 -12 115 124 YES 9 -3 -8 110 124 NO126 -12 115 126 YES 11 -1 -8 110 126 NO128 -12 115 128 YES 13 1 -8 110 128 NO130 -12 115 130 YES 15 3 -8 110 130 NO132 -12 115 132 YES 17 5 -8 110 132 NO134 -12 115 134 YES 19 7 -8 110 134 NO136 -12 115 136 YES 21 9 -8 110 136 NO138 -12 115 138 YES 23 11 -8 110 138 NO140 -12 115 140 YES 25 13 -8 110 140 NO
Spot Price Premium
PaidBuy @ Strike Price
Sell @ Spot Price
Whether Exercise
Profit / Loss from Exercise
Net Profit /
LossPremium
PaidSell @ Strike Price
Buy @ Spot Price
Whether Exercise
142 -12 115 142 YES 27 15 -8 110 142 NO144 -12 115 144 YES 29 17 -8 110 144 NO146 -12 115 146 YES 31 19 -8 110 146 NO148 -12 115 148 YES 33 21 -8 110 148 NO150 -12 115 150 YES 35 23 -8 110 150 NO152 -12 115 152 YES 37 25 -8 110 152 NO154 -12 115 154 YES 39 27 -8 110 154 NO156 -12 115 156 YES 41 29 -8 110 156 NO158 -12 115 158 YES 43 31 -8 110 158 NO160 -12 115 160 YES 45 33 -8 110 160 NO
1st Position - Long on Call Option (Strike Price: 115, Premium: 12)2nd Position - Long on Put Option (Strike Price: 110, Premium: 8)
Put Position
Net Payoff
50 42 3048 40 2846 38 2644 36 2442 34 2240 32 2038 30 1836 28 1634 26 1432 24 1230 22 1028 20 826 18 624 16 422 14 220 12 018 10 -216 8 -414 6 -612 4 -810 2 -108 0 -126 -2 -144 -4 -162 -6 -180 -8 -200 -8 -200 -8 -200 -8 -190 -8 -170 -8 -150 -8 -130 -8 -110 -8 -90 -8 -70 -8 -50 -8 -30 -8 -10 -8 10 -8 30 -8 5
Combined Position
Profit / Loss from Exercise
Net Profit /
Loss
60 66 72 78 84 90 96102
108114
120126
132138
144150
156
-30
-20
-10
0
10
20
30
40
Spot Price
Net
Pay
off fr
om C
ombi
ned
Posi
tion
0 -8 70 -8 90 -8 110 -8 130 -8 150 -8 170 -8 190 -8 210 -8 230 -8 25
60 66 72 78 84 90 96102
108114
120126
132138
144150
156
-30
-20
-10
0
10
20
30
40
Spot Price
Net
Pay
off fr
om C
ombi
ned
Posi
tion
1st Position - Long on Call Option (Strike Price: 115, Premium: 12)2nd Position - Short on Put Option (Strike Price: 110, Premium: 8)
Call Position Put Position
60 -12 115 60 NO 0 -12 8 110 6062 -12 115 62 NO 0 -12 8 110 6264 -12 115 64 NO 0 -12 8 110 6466 -12 115 66 NO 0 -12 8 110 6668 -12 115 68 NO 0 -12 8 110 6870 -12 115 70 NO 0 -12 8 110 7072 -12 115 72 NO 0 -12 8 110 7274 -12 115 74 NO 0 -12 8 110 7476 -12 115 76 NO 0 -12 8 110 7678 -12 115 78 NO 0 -12 8 110 7880 -12 115 80 NO 0 -12 8 110 8082 -12 115 82 NO 0 -12 8 110 8284 -12 115 84 NO 0 -12 8 110 8486 -12 115 86 NO 0 -12 8 110 8688 -12 115 88 NO 0 -12 8 110 8890 -12 115 90 NO 0 -12 8 110 9092 -12 115 92 NO 0 -12 8 110 9294 -12 115 94 NO 0 -12 8 110 9496 -12 115 96 NO 0 -12 8 110 9698 -12 115 98 NO 0 -12 8 110 98100 -12 115 100 NO 0 -12 8 110 100102 -12 115 102 NO 0 -12 8 110 102104 -12 115 104 NO 0 -12 8 110 104106 -12 115 106 NO 0 -12 8 110 106108 -12 115 108 NO 0 -12 8 110 108110 -12 115 110 NO 0 -12 8 110 110112 -12 115 112 NO 0 -12 8 110 112114 -12 115 114 NO 0 -12 8 110 114116 -12 115 116 YES 1 -11 8 110 116118 -12 115 118 YES 3 -9 8 110 118120 -12 115 120 YES 5 -7 8 110 120122 -12 115 122 YES 7 -5 8 110 122124 -12 115 124 YES 9 -3 8 110 124126 -12 115 126 YES 11 -1 8 110 126128 -12 115 128 YES 13 1 8 110 128130 -12 115 130 YES 15 3 8 110 130132 -12 115 132 YES 17 5 8 110 132134 -12 115 134 YES 19 7 8 110 134136 -12 115 136 YES 21 9 8 110 136138 -12 115 138 YES 23 11 8 110 138140 -12 115 140 YES 25 13 8 110 140
Spot Price Premium
PaidBuy @ Strike Price
Sell @ Spot Price
Whether Exercise
Profit / Loss from Exercise
Net Profit /
LossPremium Received
Oblige to Buy @ Strike
Price
Sell @ Spot Price
142 -12 115 142 YES 27 15 8 110 142144 -12 115 144 YES 29 17 8 110 144146 -12 115 146 YES 31 19 8 110 146148 -12 115 148 YES 33 21 8 110 148150 -12 115 150 YES 35 23 8 110 150152 -12 115 152 YES 37 25 8 110 152154 -12 115 154 YES 39 27 8 110 154156 -12 115 156 YES 41 29 8 110 156158 -12 115 158 YES 43 31 8 110 158160 -12 115 160 YES 45 33 8 110 160
1st Position - Long on Call Option (Strike Price: 115, Premium: 12)2nd Position - Short on Put Option (Strike Price: 110, Premium: 8)
Put Position
Net Payoff
YES -50 -42 -54YES -48 -40 -52YES -46 -38 -50YES -44 -36 -48YES -42 -34 -46YES -40 -32 -44YES -38 -30 -42YES -36 -28 -40YES -34 -26 -38YES -32 -24 -36YES -30 -22 -34YES -28 -20 -32YES -26 -18 -30YES -24 -16 -28YES -22 -14 -26YES -20 -12 -24YES -18 -10 -22YES -16 -8 -20YES -14 -6 -18YES -12 -4 -16YES -10 -2 -14YES -8 0 -12YES -6 2 -10YES -4 4 -8YES -2 6 -6NO 0 8 -4NO 0 8 -4NO 0 8 -4NO 0 8 -3NO 0 8 -1NO 0 8 1NO 0 8 3NO 0 8 5NO 0 8 7NO 0 8 9NO 0 8 11NO 0 8 13NO 0 8 15NO 0 8 17NO 0 8 19NO 0 8 21
Combined Position
Whether Obliges
Profit / Loss from
Obligation
Net Profit /
Loss
60 66 72 78 84 90 96102
108114
120126
132138
144150
156
-60
-40
-20
0
20
40
60
Spot PriceN
et P
ayoff
from
Com
bine
d Po
siti
on
NO 0 8 23NO 0 8 25NO 0 8 27NO 0 8 29NO 0 8 31NO 0 8 33NO 0 8 35NO 0 8 37NO 0 8 39NO 0 8 41
60 66 72 78 84 90 96102
108114
120126
132138
144150
156
-60
-40
-20
0
20
40
60
Spot Price
Net
Pay
off fr
om C
ombi
ned
Posi
tion