Question 1

You purchased one SPX call option with a strike of 1,500.You wrote one SPX call option with the same maturity date and a strike of 1,450.At maturity,what is your payoff if the S&P 500 is at 1,475?

Accepted Answer

The 1,500 call is not exercised.Payoff on 1,450 call written = (1,450 - 1,475) × $100 = -$2,500

Question 2

Tim purchased 5 put option contracts on Western Fields stock.The strike price was $35 and the option premium was $0.55.At expiration,the stock was selling for $35.75.What is the payoff on the option contracts?

Accepted Answer

Payoff = $0; The stock price exceeds the put strike price.

Question 3

You own 6 put option contracts on JL Industrial stock.You paid an option premium of $0.75 for a strike price of $42.50.On the option expiration date,the stock was selling for $41.00 a share.What is your percentage return?

Accepted Answer

Percentage return = ($42.50 - $41.00 - $0.75)/$0.75 = 100 percent

Question 4

Gerold purchased 3 put option contracts at an option premium of $0.95 and a strike price of $40.At expiration,the stock price was $42.25 per share.What is his percentage return?

Accepted Answer

Percentage return = -$0.95/$0.95 = -100 percentThe put is worthless since the stock price exceeds the strike price.

Question 5

Kim Lee purchased 6 put option contracts on Eastern Imports stock at a strike price of $47.50.The option premium was $0.65.At expiration,the stock was valued at $44.90 a share.What is her percentage return?

Accepted Answer

Percentage return = ($47.50 - $44.90 -$0.65)/$0.65 = 300 percent

Question 6

Jennifer purchased 4 put option contracts on Winslow Mfg.stock.The option premium was $0.25 and the strike price was $17.50.On the expiration date,the stock was selling for $17.75 a share.What is the total payoff on the option contracts?

Accepted Answer

Payoff = $0; The stock price exceeds the put strike price.

Question 7

You purchased 5 put option contracts on Mountain Builders stock at an option premium of $0.65.The strike price is $25.What is your break-even stock price?

Accepted Answer

Break-even stock price = $25 - $0.65 = $24.35

Question 8

Jeff paid a call premium of $0.60 when he purchased his call option with a strike price of $22.00.What is the break-even stock price?

Accepted Answer

Break-even stock price = $22.00 + $0.60 = $22.60

Question 9

You purchased 7 put option contracts on Alto Industries.The strike price was $42.50 and the option premium was $1.30.On the expiration date,the stock was valued at $41.40 a share.What is the payoff on the option contracts?

Accepted Answer

Payoff = 7 × 100 × ($42.50 - $41.40) = $770

Question 10

You own one SPX put option with a strike of 1,300.What is the payoff at maturity for this option contract if the S&P 500 index is 1,322?

Accepted Answer

The payoff = $0; The option will not be exercised.

Question 11

You own one SPX call option with a strike of 1,400.What is the payoff at maturity for this option contract if the S&P 500 index is 1,414?

Accepted Answer

Payoff = (1,414 - 1,400) × $100 = $1,400

Question 12

Josh owns 2 call options on Foster Glass stock.The exercise price is $47.50 and the stock price at expiration is $49.01.What is the total payoff on the option contracts?

Accepted Answer

Payoff = 2 × 100 × ($49.01 - $47.50) = $302

Question 13

Russ paid a total of $75 to purchase 5 call options with a strike price of $17.50.What is the break-even stock price?

Accepted Answer

Break-even stock price = $17.50 + [$75/(5 × 100)] = $17.65

Question 14

You purchased one SPX put option with a strike of 1,400.You wrote one SPX put option with the same maturity date and a strike of 1,300.At maturity,what is your total payoff if the S&P 500 index is 1,320?

Accepted Answer

The 1,300 put is not exercised.Payoff on 1,400 put purchased = (1,400 - 1,320) × $100 = $8,000

Question 15

You purchased 6 call options with a $40 strike price at a total cost of $150.On the expiration date,the underlying stock was priced at $39.20.What is the percentage return on your investment?

Accepted Answer

Percentage return = {[6 × 100 × 0] - $150}/$150 = -100 percentThe call is worthless because the strike price exceeds the stock price.

Question 16

Jasmine purchased one call option with a strike price of $35 when the call premium was $1.10.What is the break-even stock price?

Accepted Answer

Break-even stock price = $35 + $1.10 = $36.10

Question 17

Courtney purchased 5 call options with a $47.50 strike price and a call premium of $1.10.On the expiration date,the underlying stock was priced at $50.60 per share.What is her percentage return on this investment?

Accepted Answer

Percentage return = ($50.60 - $47.50 - $1.10)/$1.10 = 181.82 percent

Question 18

Rosalita purchased a put option with a strike price of $35.She paid a total of $140 for the contract.What is the break-even stock price?

Accepted Answer

Break-even stock price = $35 - ($140/100) = $33.60

Question 19

You purchased a call option with a $22.50 strike price and a call premium of $0.40.On the expiration date,the underlying stock was priced at $23.40 per share.What is the percentage return on your investment?

Accepted Answer

Percentage return = ($23.40 - $22.50 - $0.40)/$0.40 = 125%

Question 20

You own 4 put option contracts on ALZ stock.The contracts have a $17.50 strike price and you paid an option premium of $0.40.What is the break-even stock price?

Accepted Answer

Break-even stock price = $17.50 - $0.40 = $17.10

Quiz 15: Stock Options