corp_ch21_09 (version 1)

corp_ch21_09 (version 1) - Cash flows from stock option...

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WEEK VIII Cash flows from stock option contracts Challenge -- create an Arrow certificate
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Nov. 12, 2008 quotes Microsoft 20.30 dollars/share call and put options 26-months (2.17 years) to expiration  Strike Call Put 15 8.16 3.2 Positions (mat=Jan 2011) 25 3.75 8.45 Stock (x 100 shares) 25 In T-bills ($) 100,000 30 2.38 11.85 Calls/puts (on 100 shares) Current price  96,614  2.17-year Risk-free rate 1.60% strike Calls Puts Value of pf 15 30 -10 Today 25 15 50  231,889  30 -35 20 Cash flow to Trader  Stock price  From calls with strike Calls from puts with strike on maturity From stock 15 25 30 Total 15 25 30 5  12,500   -     -     -     -     (10,000)  100,000   50,000  7.5  18,750   -     -     -     -     (7,500)  87,500   45,000  10  25,000   -     -     -     -     (5,000)  75,000   40,000  12.5  31,250   -     -     -     -     (2,500)  62,500   35,000  15  37,500   -     -     -     -     -     50,000   30,000  17.5  43,750   7,500   -     -     7,500   -     37,500   25,000  20  50,000   15,000   -     -     15,000   -     25,000   20,000  22.5  56,250   22,500   -     -     22,500   -     12,500   15,000  25  62,500   30,000   -     -     30,000   -     -     10,000  27.5  68,750   37,500   3,750   -     41,250   -     -     5,000  30  75,000   45,000   7,500   -     52,500   -     -     -    32.5  81,250   52,500   11,250   (8,750)  55,000   -     -     -    35  87,500   60,000   15,000   (17,500)  57,500   -     -     -    37.5  93,750   67,500   18,750   (26,250)  60,000   -     -     -    40  100,000 
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This note was uploaded on 05/06/2010 for the course IRPS IRGN 424 taught by Professor Kane during the Fall '09 term at UCSD.

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corp_ch21_09 (version 1) - Cash flows from stock option...

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