PS8Answers - Problem 1 Calls March 7.500 4.750 2.625 1.313...

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Problem 1) Calls Strike February March April July 45 6.625 7.500 8.000 10.500 50 2.813 4.750 5.875 55 1.063 2.625 3.750 6.000 60 0.438 1.313 1.875 4.250 65 0.188 0.625 1.250 70 0.063 Puts Strike February March April July 45 1.000 1.813 2.625 4.250 50 2.375 4.000 5.000 55 5.375 7.625 8.125 8.750 60 9.750 10.875 12.500 65 15.500 16.500 16.750 70 20.750 Part 1 0 0 -5.88 50 45 39.13 5 0 -5.88 45 40 34.13 10 0 -5.88 40 35 29.13 15 0 -5.88 35 30 24.13 20 0 -5.88 30 25 19.13 25 0 -5.88 25 20 14.13 30 0 -5.88 20 15 9.13 35 0 -5.88 15 10 4.13 40 0 -5.88 10 5 -0.88 45 0 -5.88 5 0 -5.88 50 0 -5.88 0 -5 -10.88 55 5 -0.88 0 -5 -5.88 60 10 4.13 0 -5 -0.88 65 15 9.13 0 -5 4.13 70 20 14.13 0 -5 9.13 75 25 19.13 0 -5 14.13 80 30 24.13 0 -5 19.13 85 35 29.13 0 -5 24.13 90 40 34.13 0 -5 29.13 95 45 39.13 0 -5 34.13 100 50 44.13 0 -5 39.13 Part 2 -- Writing Options 3Com Stock Gross Payoff $50 April Call Net Payoff April Call Gross Payoff $50 April Put Net Payoff April Put Portfolio Value 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 -20 -10 0 10 20 30 40 50 Options on 3Com Net Payoff April Call Net Payoff April Put Portfolio Value
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0 0 5.88 -50 -45 -39.13 5 0 5.88 -45 -40 -34.13 10 0 5.88 -40 -35 -29.13 15 0 5.88 -35 -30 -24.13 20 0 5.88 -30 -25 -19.13 25 0 5.88 -25 -20 -14.13 30 0 5.88 -20 -15 -9.13 35 0 5.88 -15 -10 -4.13 40 0 5.88 -10 -5 0.88 45 0 5.88 -5 0 5.88 50 0 5.88 0 5 10.88 55 -5 0.88 0 5 5.88 60 -10 -4.13 0 5 0.88 65 -15 -9.13 0 5 -4.13 70 -20 -14.13 0 5 -9.13 75 -25 -19.13 0 5 -14.13 80 -30 -24.13 0 5 -19.13 85 -35 -29.13 0 5 -24.13 90 -40 -34.13 0 5 -29.13 95 -45 -39.13 0 5 -34.13 100 -50 -44.13 0 5 -39.13 Part 3 0 0 0 0 50 60 70 50 50 50 70 0 0 0 5 0 0 0 45 55 65 50 45 45 65 -5 0 0 10 0 0 0 40 50 60 50 40 40 60 -10 0 0 15 0 0 0 35 45 55 50 35 35 55 -15 0 0 20 0 0 0 30 40 50 50 30 30 50 -20 0 0 25 0 0 0 25 35 45 50 25 25 45 -25 0 0 30 0 0 0 20 30 40 50 20 20 40 -30 0 0 35 0 0 0 15 25 35 50 15 15 35 -35 0 0 40 0 0 0 10 20 30 50 10 10 30 -40 0 0 45 0 0 0 5 15 25 50 5 5 25 -45 0 0 50 0 0 0 0 10 20 50 0 0 20 -50 0 0 55 5 0 0 0 5 15 55 0 0 20 -55 5 5 60 10 0 0 0 0 10 60 0 0 20 -60 10 10 65 15 5 0 0 0 5 65 0 0 20 -65 5 5 70 20 10 0 0 0 0 70 0 0 20 -70 0 0 75 25 15 5 0 0 0 75 -5 5 25 -70 0 0 80 30 20 10 0 0 0 80 -10 10 30 -70 0 0 85 35 25 15 0 0 0 85 -15 15 35 -70 0 0 90 40 30 20 0 0 0 90 -20 20 40 -70 0 0 95 45 35 25 0 0 0 95 -25 25 45 -70 0 0 100 50 40 30 0 0 0 100 -30 30 50 -70 0 0 3Com Stock Gross Payoff $50 April Call Net Payoff April Call Gross Payoff $50 April Put Net Payoff April Put Portfolio Value 3Com Stock Gross Payoff $50 April Call Gross Payoff $60 April Call Gross Payoff $70 April Call Gross Payoff $50 April Put Gross Payoff $60 April Put Gross Payoff $70 April Put Long Stock + Long 50 Put Long 50 Put + Short 70 Call Long 70 Call + Long 50 Put Long 50 Call + Long 70 Put Short Stock + Long 70 Call Calls: Long 50, 70 2 Short 60 Puts: Long 50, 70 2 Short 60 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 -50 -40 -30 -20 -10 0 10 20 Writing Options on 3COM Net Payoff April Call Net Payoff April Put Portfolio Value Portfolio 1 Long Stock + Long 50 Put
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0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 40 50 60 70 80 90 100 110 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 -40 -30 -20 -10 0 10 20 30 40 50 60 Portfolio 2 Long 50 Put + Short 70 Call 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 -10 0 10 20 30 40 50 60 Portfolio 3 Long 70 Call + Long 50 Put 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 0 10 20 30 40 50 60 70 80 Portfolio 4 Long 50 Call + Long 70 Put -10 0 10 Portfolio 5 Short Stock + Long 70 Call
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Part 4 Strike Call Price P+S-PV(K) Difference Put Stock PV(K) 45 $8.000 $8.811 $0.811 $2.625 $50.750 $44.564 50 $5.875 $6.234 $0.359 $5.000 $50.750 $49.516 55 $3.750 $4.407 $0.657 $8.125 $50.750 $54.468 60 $1.875 $3.831 $1.956 $12.500 $50.750 $59.419 65 $1.250 $3.129 $1.879 $16.750 $50.750 $64.371 It would appear that Put-Call parity does not hold.
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