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  3. 1/2/2019 s0=$50 ...

1/2/2019 S0=$50 ...

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Question

Finance

1/2/2019

S0=$50

ST=$52

ST=$52

Calls

Puts

Expiration

Strike

Call Premium

Put Premium

T (Days)

T in Years (/360)

r

S0

Payoff

Profit

Payoff

Profit

4/2/2019

45

8.18

2.12

90

0.25

10%

50.00

7

-1.18

0

-2.12

4/2/2019

50

5.18

4.00

90

0.25

10%

50.00

2

-3.18

0

-4.00

4/2/2019

55

2.18

5.88

90

0.25

10%

50.00

0

-2.18

3

-2.88

5/2/2019

45

9.18

2.77

120

0.33

10%

50.00

5/2/2019

50

6.18

4.62

120

0.33

10%

50.00

5/2/2019

55

3.18

6.46

120

0.33

10%

50.00

Its January 2, 2019. The 3-month Tbill rate is 10%. The Call and Put prices are listed above. One contract represents 100 shares of stock.

  1. Explain why the Call Premiums are larger at each strike for the 5/2 Expirations than the 4/2 Expirations.
  2. Use Put-Call Parity to find the Put Premium if the current Stock Price (S0) = $50.00.
  3. Calculate the Payoff and Profit for each option if the Price at Expiration (ST) = $52.00.

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