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D. Calculating Profi ts/Losses from Options Trades- Gustavo bought 12 call options on the stock of Cartswell Carts. The stock price is currently $61.75 per share. The strike
price was $65, and the option premium was $2.50.
a. Do these options give Gustavo the right to buy or sell shares of the company? How many shares does he have the
right to buy/sell?
b. Calculate the total amount Gustavo paid for these options.
c. Calculate his profi t or loss if the price rises to $75 a share.
d. Calculate his profi t or loss if the price rises to $65 a share.
e. Calculate his profi t or loss if the price drops to $55 a share.- Kerry bought 20 put options on the stock of Global Consolidated Megacorp. The stock currently sells for $17.96 per
share, and the strike price is $17.50. The option premium was $5.18.
a. Do these options give Kerry the right to buy or sell the company’s shares? How many shares does she have the
right to buy/sell?
b. Calculate the total amount she paid for these options.
c. Calculate her profi t or loss if the price rises to $22.50.
d. Calculate her profi t of loss if the price rises to $20.00.
e. Calculate her profi t or loss if the price drops to $15.00.- Repeat Exercise 16c, d, and e, but calculate the profi ts or losses as percents.
- Repeat Exercise 17c, d, and e, but calculate the profi ts or losses as percents.
Question 20 refers to the option chain for Ganargua Hydro given in the text of this section.- Suppose that Jeff thinks that Ganargua Hydro’s stock will rise, and wants to buy options for 500 shares. The company’s
current share price is $35.59.
a. How many options contracts would Jeff buy?
b. Calculate the total cost for Jeff to buy a November 2006 call option for 500 shares at a strike price of $45.
c. Suppose that Jeff is right that the price will rise. If the price rises to $45 a share and he exercises his option,
calculate his profi t or loss.
d. If the price rises to $50 a share and he exercises his option, calculate his profi t or loss.
e. Suppose that Jeff exercises his options 55 days after buying the contract, when the stock price is $49.93. Calculate
his profi t as a percent rate of return.
f. What is the minimum share price at which Jeff can exercise his options without losing money?- The GlobalInvestrex 250 Index presently stands at 1,135.09. The option premium for January calls at 1,150 on this
index is 17.35. The index multiplier is 10.
a. Calculate the amount you would pay for 15 of these option contracts.
b. If the index rises to 1,184.32 and you exercise your options at that point, calculate your profi t or loss.
c. If the index rises to 1,162.35 and you exercise your options at that point, calculate your profi t or loss.Exercises 6.3 287