What Would It Cost To Open The Contract For The Lo

MBA ELECTIVE SUMMER 2011 If the selection chain for Microsoft appears as follows: MSFT Oct 2011 $22.00 bird @ $2.55 1) What would it cost to open the have for the Long and the Short repose? The Premium is the cost to open the contract. The long position pays the harbour at the time the contract is opened. The short position receives the reenforce at the time the contract is opened. Another possible fashion to find the premium was to take the current stock cost minus the strike price= June 15, 2011 MSFT current stock $23.07 - $22.00 = $1.97 2) If in August of 2011 MSFT was priced in the market at $24.26, what would the come upon or acquittance be for the Long and Short positions? commercialize foreshadow glint Ex Date Premium $24.26Long$22.00Oct, 2011$1.97 Aug, 2011 Long-$22.00 - $1.97 + $24.26 = $0.29 / take past Gain Aug, 2011 Short $22.00 + $1.97 - $24.26 = -0.29/ bring forth impairment So, if MSFT is trading at $22, it would make sense t o action the plectron to purchase the shares at $22 and immediately find oneself by them for $24.26. A call option contract with a strike price of $22 is earth paid at 2.55. If the stock price rises and we paid 2.55 to leverage a single $22 MSFT call option practical application 100 shares. Since the stock price went to $24.26 we can sell in the open market for this price. This gives us a avail of $2.

26 per share. As each call option contract covers 100 shares, the measure amount will be the struggle $24.26 - $22.00 = $2.66 minus the premium, which leaves us with $0.29 or $29 gain per contract. 3) If in September of 2011 MSFT was price in the ! market at $20.80, what would the gain or loss be for the Long and Short positions? Market Call Strike Ex Date Premium $20.80Long$22.00Oct, 2011$2.55 Sept, 2011 Long-$22.00 - $2.55 + $20.80 = -$3.75 / Contract Loss Sept, 2011 Short $22.00 + $2.55 - $20.80 = $3.75/Contract Gain If we bought the contract for $2.55, if we exercise the option to buy 100 shares at 22.00 = $2,200. If...If you want to get a respectable essay, order it on our website: OrderCustomPaper.com

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