Long Call Betsy has just opened an options account and enters an order to buy 1 XYZ Oct 70 Call for $300. What is Betsy’s maximum potential gain? What.

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Presentation transcript:

Long Call Betsy has just opened an options account and enters an order to buy 1 XYZ Oct 70 Call for $300. What is Betsy’s maximum potential gain? What would be loss/gain if stock was at 84? What would be loss/gain if stock was at 67? What is the breakeven point?

Straddle Practice A customer sells 1 Biotech 55 call for a premium of $3, and 1 Hess 55 put for a premium of $2 when the price of ABC stock is $58 per share. What is the gain/loss if the stock is trading at 71 at expiration? What is the gain/loss if the stock is trading at 57 at expiration? What is the maximum gain potential? What is the maximum loss potential? What are the breakeven points?

Long the Stock & Long a Put An investors buys 100 shares of XYZ stock at $30/share and one XYZ 40 put @ 3 to hedge the position. The stock has appreciated to $40/share in the past eight months.The investor is confident that the stock is a good long-term investment with additional upside potential but is concerned about a near-term weakness in the overall market that could wipe out his unrealized gains. If XYZ stock drops to $27 and the investor exercises the put, what is the profit or loss on the hedged position? A. Loss of $3/share B. Gain of $4/share C. Loss of $7/share D. Gain of $7/share

Long the Stock & Long a Put An investors buys 100 shares of XYZ stock at $30/share and one XYZ 40 put @ 3 to hedge the position. The stock has appreciated to $40/share in the past eight months. The investor is confident that the stock is a good long-term investment with additional upside potential, but is concerned about a near-term weakness in the overall market that could wipe out his unrealized gains. What is the investor's breakeven point for this position? A. $40 B. $37 C. $33 D. $47

Covered Call: Long the Stock and Short the Call Writing (selling) covered calls is the most conservative of options strategies. Recall that when an investor sells a call, he or she is obligated to deliver the stock at the strike price until the contract expires. If the investor owns the underlying stock, then he or she is "covered" and can deliver if exercised.

Covered Call: Long the Stock and Short the Call The investor is long 100 shares PGS at $51 and writes one PGS May 55 call @ 2. What is the investor's maximum gain from this strategy? A. $2 share B. $3 share C. $5 share D. $6 share

Covered Call: Long the Stock and Short the Call The investor is long 100 shares PGS at $51 and writes one PGS May 55 call @ 2. What is the investor's maximum gain from this strategy? A. $2 share B. $3 share C. $5 share D. $6 share (D is the answer)

Covered Call: Long the Stock and Short the Call The investor is long 100 shares PGS at $51 and writes one PGS May 55 call @ 2. What is the breakeven for this combination? A. $55 B. $53 C. $49 D. $45

Covered Call: Long the Stock and Short the Call The investor is long 100 shares PGS at $51 and writes one PGS May 55 call @ 2. What is the breakeven for this combination? A. $55 B. $53 C. $49 (C is the answer) D. $45