Todays share price of Netflix is $270. You think Netflix's stock will rise over the...
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Accounting
Todays share price of Netflix is $270. You think Netflix's stock will rise over the next 3 months.
Today you observe the following option prices (all expiring in 3 months):
Option 1: Call Option Premium = $9. a Strike Price = $275
Option 2: Call Option Premium = $7. a Strike Price = $280
1. Which of these options is in-the-money today?
A) Both B) Neither C) Only Option 1
D) Only Option 2
2. Today you buy Option 1 and sell Option 2; (bull call spread). At expiration the stock price equals $279. What is your profit or loss (on a per share basis)? A) A loss of $5 B) A loss of $3
C) A profit of $2
D) A profit of $3
E) A profit of $5
3. Suppose you purchase Option 1 and also purchase Option 2. What is your breakeven stock price (on a per share basis) at expiration? A) $284 B) $285.50
C) $287.50
D) $291 E) $296
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