Holding the call option longer affects time value of option

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Reference no: EM131588381

Use the stock prices and all option prices of alphabet (google) as of a closing price on either June 19, 20 or 21st. Please identify in your response which day you picked for your closing prices. Choose option expiration dates that are at least one month out from June 16th.

1. Diagram buying a call (Please identify stock prices used, strike prices used, expiration dates used, premiums paid and/or received and any other information needed to properly grade your response)

a. Show the maximum loss and identify that point on the graph.

b. Show the maximum profit and identify that point on the graph.

c. Show the breakeven stock price and identify that point on the graph.

d. Diagram a-c above for a higher exercise price.

e. Explain why a higher exercise price changes the numbers/points for a-c.

f. Diagram a-c above for a lower exercise price.

g. Explain why a lower exercise price changes the numbers/points for a-c.

h. Explain when you would want to buy a call option and why.

i. Explain how holding the call option longer affects the time value of the option and the profit obtained.

Reference no: EM131588381

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