Problems

1.

AB Flex Inc. stock is currently trading at $38. The time left until expiration of a call and put trading on
AB Flex Inc.'s stock is 6 months and the strike price is $45. If the call is currently trading at $1.96 and
the Treasury bill rate is 10 percent per year, what price should the put sell for?

2.

Use the Black-Scholes model to calculate the theoretical value of a DBA December 90 call option.
Assume that the risk free rate of return is 6 percent, the stock has a variance of 36 percent, there are 91
days until expiration of the contract, and DBA stock is currently selling at $100 in the market.

3.

You buy 1,000 shares of Sunbeam at 11 1/8 and write 10 calls at a premium of 4 3/8 with a strike price
of 7 1/2. The stock goes to 20 in 6 months. You receive a 8 cent dividend per share. If the calls are
exercised (which is the likely assumption), what is your percentage return?

Chapter Nineteen
Options

240

Chapter Nineteen
Options

241

Chapter Nineteen
Options

242