Calls and Puts Quiz PDF

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SPRING 2021;Professor Calhoun calls and puts quiz...

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1. A trader buys a 3 month American put option with a strike price of $50 for $2.50. The underlying stock is trading at $49. What is the intrinsic value of the option?  IV = max [(X – So),0]  = max (50-49,0)  = $1.00 2. A trader buys a 3-month American call option with a strike price of $50 for $13. The underlying stock is trading at $60. What is the time value of the option?  IV = max [(So – X),0] = max (60-50,0) = $10  TV = Co – IV  = $13-$10  = $3 3. A trader buys a 3-month American call option with a strike price of $125 for $7. The underlying stock is trading at $123. What is the intrinsic value of the option?  IV = max [(So – X),0]  = max (123-125,0)  = $0 4. A trader bought a three-month European Call on BAC for $1. The call has a strike price of $16. At expiration what price does BAC need to trade at for the trader to break even?  Call B/E = X + Co  = 16+1  = $17 5. If you pay $1.35 to buy a European put with a $25 strike price on a stock trading at $24.42, what is the maximum profit you can make?  MAX P/L = X – Po  = 25-1.35  = $23.65...