A fellow options investor tells you that he is going to enter an order to “buy to close.” Explain exactly what he means.
2. (2 points)
What is the difference between a European option and an American option?
3. (54 points)
On Friday, Nov. 14, 2014, Alibaba stock (symbol BABA) closed at $115.10 a share, up $.26 on the day. Consider the following chart giving the premium as of close of trading on that day on various options on Alibaba shares:
In the questions that follow, use the “Last Sale” column to answer questions which involve option pricing.
a. (3 points)
What is the premium on the December, 115 call, i.e. the call option which expires on the third Friday of December of 2014, and has a strike price of $115?
b. (5 points)
How much would an investor who wanted to buy 1 contract of this option have had to spend (before considering any commission or fees)?
c. (10 points)
What is the formula for the intrinsic value of a call? What was the intrinsic value of the Dec. 118 call? Was this option “in the money” or “out of the money”? What was the time value of this option?
d. (8 points)
Was the Dec. 114 call in or out of the money? What was the intrinsic value of this option? What was the time value of this option?
e. (10 points)
What was the premium on the Dec. BABA 118 put? Was this option in or out of the money? What was the intrinsic value of this put? What is the time value?
f. (8 points)
What was the intrinsic value of the Dec. BABA 112 put? Was this option in or out of the money? What was the option’s time value?
g. (10 points)
Based on the $115.10 price of Alibaba’s shares as of the close on Friday, Nov. 14, what is the leverage on the Dec. 119 call? Round
Finance 801- Managerial Finance- Fall 2014 Instructor: Prof. Mark S. Johnson, Ph.D. Class Meets Section 002 TTH 10:20-11:40 G032 Hubbard Section 001 TTH 2:40-4:00 2400 Engineering Building Office: 324 Eppley Center Office phone: 432-6253 E-mail: johnsonm@bus.msu.edu Office Hours: MW 2:30-3:30 PM and by appointment Textbook: Corporate Finance, 10th Edition, by Stephen Ross, Randolph Westerfield, and Jeffrey Jaffe, 2008, McGraw-Hill/Irwin. ISBN 978-0-07-803477-0.…
probability. Probabilities can be expressed in a variety of ways, most often as a percentage, a fraction, or a decimal. Example 1: What is the probability of rolling a 6 on a die? Since there are 6 possible outcomes, and only one is the one we want, the probability is 1 in 6. This would be written in fraction form as 1 . 6 To find this in decimal form, divide the 1 by the 6 and you should get 0.1667. To convert to a percentage, multiply by 100 to get 16.67% Often we will need to determine the probability…
0310246547_EmotionlyCh_01.qxd 12/19/02 11:59 AM Page 59 CHAPTER 4 INVENTORY OF SPIRITUAL/EMOTIONAL MATURITY k he previous chapter outlined a biblical basis for a new paradigm of discipleship, one that includes emotional maturity. The following diagnostic does the same thing, but in a practical and personal way. Emotional health is not merely an idea to think about. It is an experience for you when you are alone and in your close relationships with others. Take a few minutes to reflect on this…
Introduction: Piriformis syndrome (PS) is a neuromuscular condition with a special combination of several characteristic manifestations mainly highlighted by gluteal pain(1). Others may involve pain in the lower back area down to buttocks, paraesthesia, numbness and limitations to some weight-bearing activities like walking for long periods, standing and sitting to some degrees(1-5). Other symptoms may also include: the sciatic notch tenderness, swelling, sexual dysfunctions and splayfoot with a…
FOR OFFICIAL USE C KU Total Marks PS 0500/402 NATIONAL QUALIFICATIONS 2011 THURSDAY, 26 MAY 10.50 AM – 12.20 PM CHEMISTRY STANDARD GRADE Credit Level Fill in these boxes and read what is printed below. Full name of centre Town Forename(s) Surname Date of birth Day Month Year Scottish candidate number Number of seat 1 All questions should be attempted. 2 Necessary data will be found in the Data Booklet provided for Chemistry at Standard Grade and Intermediate 2…
Product Description 1. (TCO 7) Some of the characteristics of lean systems include which of the following? 2. (TCO 7) Mass customization means 3. (TCO 8) One scarce item in the future will be water. Which is the least expensive way to get water from places of abundance to places of need? 4. (TCO 8) If there is one thing that advertisers agree upon, it is the growing importance of social media in product promotion. Given this information 5. (TCO 1) You own a hardware store in…
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Crispin Jewitt p. 2 of 22 For review by SRO For review by SRO + CPO For review by SRO Project Board Revisions agreed at 28.07.2004 Project Board Meeting Version 0.5 Date 04.08.04 Archival Sound Recordings Project CONTENTS LIST 1. INTRODUCTION....................................................................................................................... 5 1.1 1.2 1.3 2. PURPOSE OF THIS DOCUMENT ..............................................................…
