Break-even on this investment if the option is exercised

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Reference no: EM131934528

A) Andrea wrote a three-month call on Echo stock. The option contract cost $200 and the strike price was $10. What does the market price of Echo have to be for Andrea to break-even on this investment if the option is exercised? Ignore transaction construed taxes. Show all calculations. Graph in Excel and label your graph.

B) Rex bought a put on Alpha stock with a strike price of $35 when the market price of Alpha stock was $33 a share. Alpha is currently selling at $34 a share. Which of the following statement/s are true given this information?

I. Rex's option is worth at least $100 today.

. Rex's option is worthless today.

. Rex's option has more value today than when he bought it. IV. Rex's option has less value today than when he bought it. Explain

C) Allison bought 100 shares (1 round lot) of MIKO, Inc. stock at a price of $35 a share. In addition, she bought a 35 put on MIKO at a cost of $125 (1 contract). Which of the following are true about Allison's position from now until the option expiration date?

I. Her maximum loss is $3,625.

II. Her maximum loss is $125.

III. Her minimum gain is $125.

IV. Her maximum profit is unlimited. Explain

D) Mary wrote a 40 call on ABC stock at a price of $275 (1 contract). She does not own any shares of ABC. Mary has

I. limited her losses to $275.

II. unlimited loss potential.

III. limited her gains to $275.

IV. unlimited profit potential. Explain

Reference no: EM131934528

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