k at the Intel options in Figure 1 Suppose you buy a Novembe

k at the Intel options in Figure 1. Suppose you buy a November expiration call option with ise price $21. Suppose the stock price in November is $21.75 (10 points) erci vill you exercise your call 7 What is the profit on what if you had bought the November call withition 2 your posit esercise price $22 C what if you had bought the November put with Figure 1 Trading data on Intel option Intel (INTC) Call Interest Last 01414 003 30765 0.52 127518 098 Expiration Strike Last VolumeOpen Int Oet 200920.00 0.84 36929 Nov 2009 20.00 1.21 Jan 201020.001.664709 Apr 201020.00 2.10 684 Oct 200921.00 0.17 Nov 2009 21.00 0.64 23848 Jan 2010 21.001.1122091 4990 1.504 93413 033 2190 25003 094640 77484 34338 141 2440 6063 198 1355 107054: 122 | 2048 27373 163959 2073 4235 Apr 2010 21.00 1.58 Oet 2009 22000210327 25995 Nov 2009 22.00 0.30 Apr 2010 22.00 1.15 2213 2679 762

Solution

For November Expiring Call Option

Strike Price = $21

call premium = $64.

a.

Stock price in November = $21.75.

Since, Stock price is more than Strike price, so option is in the money. So option should be excercised.

Profit from excercise = (Stock price - Strike price) - Call premium

= ($21.75 - $21.00) - $0.64

= $0.75 - $0.64

= $0.11

Profit from excercise call option is $0.11.

b.

If strike price = $22

Stock price = $21.75.

Since, Stock price is less than strike price, so option is out of money. So option culd not be excecise.

c.

If instead of Call option its is put option with strike price $22 and stock price of $21.75. Here, stock price is less than strike price, so Put option is in the money. So option should be excecise.