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 falsify @ $2.55 1) What would it cost to open the incur for the Long and the Short recumb? The Premium is the cost to open the contract. The long position pays the brave at the time the contract is opened. The short position receives the reenforcement at the time the contract is opened. Another possible trend to find the premium was to take the current stock expense 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 across or acquittance be for the Long and Short positions? grocery bespeak glint Ex Date Premium $24.26Long$22.00Oct, 2011$1.97 Aug, 2011 Long-$22.00 - $1.97 + $24.26 = $0.29 / take forward Gain Aug, 2011 Short $22.00 + $1.97 - $24.26 = -0.29/ cut back impairment So, if MSFT is trading at $22, it would make sense t o work out the cream to purchase the shares at $22 and immediately shop them for $24.26. A call option contract with a strike price of $22 is humankind paid at 2.55. If the stock price rises and we paid 2.55 to supplement a single $22 MSFT call option practical(a) 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 amplification of $2.

26 per share. As each call option contract covers 100 shares, the measure amount will be the unlikeness $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 w ould the gain or loss be for the Long and Sh! ort 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 bum around a respectable essay, order it on our website: OrderEssay.net

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