The stock of Biovivaplus currently sells for $20 a share. You buy a European call option on the stock with a strike price of $20, for a $2.45 option premium.

Financial Options

 

 

Type up a 1-2 page report in Word base on the excel file.

In the report, for each option position:

1) Describe the relationship between the payoff and stock price

2) Describe why the strategy (long/short call and put) would be undertaken

3) Under what circumstances will the strategy have a beneficial payoff

 

Part 1: Long Call

The stock of Biovivaplus currently sells for $20 a share. You buy a European call option on the stock with a strike price of $20, for a $2.45 option premium. The potential stock prices at option maturity are provided in the table in the Excel file.

Part 2: Short Call

The stock of Biovivaplus currently sells for $20 a share. You write a European call option on the stock and receive a $2.45 option premium. The strike price of the option is $20. The potential stock prices at option maturity are provided in the table in the Excel file.

Part 3: Long Put

The stock of Biovivaplus currently sells for $20 a share. You buy a European put option on the stock for a $2.21 option premium. The strike price of the option is $20. The potential stock prices at option maturity are provided in the table in the Excel file.

Part 4: Short Put

The stock of Biovivaplus currently sells for $20 a share. You write a European put option on the stock and receive a $2.21 option premium. The strike price of the option is $20. The potential stock prices at option maturity are provided in the table in the Excel file.