Problem
Use Tesla's information below to answer this question:
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Tesla Inc (TSLA)
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2/27/23
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Stock P = 207.63
|
|
Strike Price
|
Days
|
Call
|
Put
|
|
185
|
32
|
30.40
|
6.90
|
|
190
|
32
|
26.90
|
8.45
|
|
195
|
32
|
23.70
|
10.15
|
|
185
|
53
|
35.25
|
11.10
|
|
190
|
53
|
32.00
|
12.90
|
|
195
|
53
|
28.95
|
14.85
|
a) For rows 1-3, why do the premiums for the call option fall, while those for the put option rise?
b) Why are the premiums in rows 4-6 higher than those in rows 1-3 for both calls & puts?
c) Compare the call option premiums and the put option premiums. Why do you think they differ so such an extent?
d) Suppose you purchase the call option with a strike price of 190 (expiration in 32 days) today. Would you exercise this option at expiration if, at that time, the stock price is 215? Find your profit/loss, and your rate of return on investment.
e) Suppose you purchase the put option with a strike price of 190 (expiration in 32 days) today. Would you exercise this option at expiration if, at that time, the stock price is 215? Find your profit/loss, and your rate of return on investment.