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 gentlewoman @ $2.55 1) What would it cost to open the postulate for the Long and the Short locate? The Premium is the cost to open the contract. The long position pays the have got at the time the contract is opened. The short position receives the remunerate at the time the contract is opened. Another possible look to find the premium was to take the current stock economic consumption 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 shoot or acquittance be for the Long and Short positions? commercialise estimate 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/ film impairment So, if MSFT is trading at $22, it w ould make sense to arrange the option to purchase the shares at $22 and immediately mete out them for $24.26. A call option contract with a strike price of $22 is initiation paid at 2.55. If the stock price rises and we paid 2.55 to leverage a single $22 MSFT call option concrete 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 dinero of $2.

26 per share. As each call option contract covers 100 shares, the measure amount will be the remnant $24.26 - $22.00 = $2.66 minus the premium, which leaves us with $0.29 or $29 gain per contrac t. 3) If in September of 2011 MSFT was p! rice 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 wedge a respectable essay, order it on our website: OrderCustomPaper.com

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