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1) You own some shares of AMZN in your long term portfolio, currently trading at $1,903,...

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Finance

1) You own some shares of AMZN in your long term portfolio,currently trading at $1,903, and are thinking of getting some extraincome by selling covered calls.

You sell 200 shares worth of 3 month call options on AMZN, witha strike price of $2,175 and a premium of $11. At expiration, AMZNis trading at $2,073 in the spot market. What is your net profit onthis position?

2) There is a great deal of uncertainty in the markets about thefuture prospects of XYZ company. You decide to buy a straddle onXYZ, buying 300 shares each of put and a call option with a strikeprice of $117. The put is trading at $4.3 and the call is tradingat $4.4. At maturity, XYZ is priced at $107.8. What is your netprofit on this position?

Answer & Explanation Solved by verified expert
4.4 Ratings (688 Votes)
1 No of AMZN shares sold 200 3 month call option sold with the premium of 11 In case selling options seller receives the premium Premium received premium per share no of shares 11 200 2200 Strike price of sold call options is 2175 Spot price at expire    See Answer
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1) You own some shares of AMZN in your long term portfolio,currently trading at $1,903, and are thinking of getting some extraincome by selling covered calls.You sell 200 shares worth of 3 month call options on AMZN, witha strike price of $2,175 and a premium of $11. At expiration, AMZNis trading at $2,073 in the spot market. What is your net profit onthis position?2) There is a great deal of uncertainty in the markets about thefuture prospects of XYZ company. You decide to buy a straddle onXYZ, buying 300 shares each of put and a call option with a strikeprice of $117. The put is trading at $4.3 and the call is tradingat $4.4. At maturity, XYZ is priced at $107.8. What is your netprofit on this position?

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