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    Chapter 20: Options Markets: Introduction: 100 Rate of Return (%)

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    viswadutt
    This document discusses options markets and provides examples of call and put options with different strike prices. It shows that all of the options in the example would result in losses. Tables are presented comparing potential dollar returns and rates of return over 6 months for investing fully in stocks, options, or a combination of bills and options, depending on the price of the underlying stock. Investing solely in options could result in a total loss, while combining options with bills provides the opportunity for both positive and negative returns.

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    Chapter 20: Options Markets: Introduction: 100 Rate of Return (%)

    Uploaded by

    viswadutt
    11 views1 page
    This document discusses options markets and provides examples of call and put options with different strike prices. It shows that all of the options in the example would result in losses. Tables are presented comparing potential dollar returns and rates of return over 6 months for investing fully in stocks, options, or a combination of bills and options, depending on the price of the underlying stock. Investing solely in options could result in a total loss, while combining options with bills provides the opportunity for both positive and negative returns.

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    bodie solutions

    Original Title

    Ch 20 Revised

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    This document discusses options markets and provides examples of call and put options with different strike prices. It shows that all of the options in the example would result in losses. Tables are presented comparing potential dollar returns and rates of return over 6 months for investing fully in stocks, options, or a combination of bills and options, depending on the price of the underlying stock. Investing solely in options could result in a total loss, while combining options with bills provides the opportunity for both positive and negative returns.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    11 views1 page

    Chapter 20: Options Markets: Introduction: 100 Rate of Return (%)

    Uploaded by

    viswadutt
    This document discusses options markets and provides examples of call and put options with different strike prices. It shows that all of the options in the example would result in losses. Tables are presented comparing potential dollar returns and rates of return over 6 months for investing fully in stocks, options, or a combination of bills and options, depending on the price of the underlying stock. Investing solely in options could result in a total loss, while combining options with bills provides the opportunity for both positive and negative returns.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 1

    CHAPTER20:OPTIONSMARKETS:INTRODUCTION

    1.
    a.
    b.
    c.
    d.
    e.
    f.
    2.

    Calloption,X=$22.50
    Putoption,X=$22.50
    Calloption,X=$25.00
    Putoption,X=$25.00
    Calloption,X=$27.50
    Putoption,X=$27.50

    Cost
    $2.70
    $1.90
    $1.50
    $3.10
    $0.75
    $4.80

    Payoff
    $2.50
    $0.00
    $0.00
    $0.00
    $0.00
    $2.50

    Profit
    $0.20
    $1.90
    $1.50
    $3.10
    $0.75
    $2.30

    Intermsofdollarreturns,basedona$10,000investment:
    StockPrice
    Allstocks(100shares)
    Alloptions(1,000options)
    Bills+100options

    PriceofStock6MonthsfromNow
    $80
    $100
    $110
    $120
    $8,000 $10,000 $11,000 $12,000
    $0
    $0
    $10,000 $20,000
    $9,360 $9,360 $10,360 $11,360

    Intermsofrateofreturn,basedona$10,000investment:
    StockPrice
    Allstocks(100shares)
    Alloptions(1,000options)
    Bills+100options

    PriceofStock6MonthsfromNow
    $80
    $100
    $110
    $120
    20%
    0%
    10%
    20%
    100%
    100%
    0%
    100%
    6.4%
    6.4%
    3.6%
    13.6%

    Rate of return (%)


    100

    All options
    All stocks

    Bills plus options

    100
    110

    6.4

    100

    201

    ST

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