Problem: Use the options quote information shown here to answer the questions that follow. The stock is currently selling for $114.
Calls Puts
Option and NY Close - Expiration -Strike Price - Vol. Last - Vol. Last
Macrosoft
Feb 110 85 7.60 40 .60
Mar 110 61 8.80 22 1.55
May 110 22 10.25 11 2.85
Aug 110 3 13.05 3 4.70
a. Suppose you buy 10 contracts of the Feb 110 call option. How much will you pay, ignoring commissions.
b. In part (a), suppose that Macrosoft stock is selling for $1.40 per share on the expiration date. How much is your options investment worth? What if the terminal stock price is $125? Explain.
c. Suppose you buy 10 contracts of the Aug 110 put option. What is your maximum gain? On the expiration date, Macrosoft is selling for $104 per share. How much is your options investment worth? What is your net gain?
d. In part (c), suppose you sell 10 of the Aug 110 put contracts. What is your net gain or loss if Macrosoft is selling for $103 at expiration? For $132? What is the break-even price - that is, the terminal stock price that results in a zero profits?