Equity Options Question.

#1
Hi All.

We have an exam tomorrow about equity options. I am confused about something and i wanna ask u a question.


Ex-1

Royal bak of Scotland

Share price :61

in January Call option is 10.5 and put option 9. Exercise price is 60.
in December Call option is 9.


Question is, if we buy straddle in january, call option in december and share.

So what is my net profit @ 100.


Thanks.
 
#2
My Solution is ;

From share price my profit is +39

From in january Straddle profit is : 100 - 70.5 (call) = 29.5 and -9 (put) = +20.5

From in December Call option profit is :100-69 = +31

So net profit is 31 + 20.5 + 39 =80.5

so is it ture ?
 

praveen taneja

Well-Known Member
#3
My Solution is ;

From share price my profit is +39

From in january Straddle profit is : 100 - 70.5 (call) = 29.5 and -9 (put) = +20.5

From in December Call option profit is :100-69 = +31

So net profit is 31 + 20.5 + 39 =80.5

so is it ture ?
:clapping::clapping::clapping::clapping:
 

columbus

Well-Known Member
#4
My Solution is ;

From share price my profit is +39

From in january Straddle profit is : 100 - 70.5 (call) = 29.5 and -9 (put) = +20.5

From in December Call option profit is :100-69 = +31

So net profit is 31 + 20.5 + 39 =80.5 ???

so is it ture ?
My knowledge about Options is rather poor.They are many experts on
Straddles and Strangles in OPTIONS sections.
Please rework your net profit.
 
#5
I am Confused about share price. For Example After January Straddle; my straddle profit is 20.5 (@ 100 ) so my share price now 120.5. is it true ?

Or After December call option my profit is 31 (@ 100 ) so our new share price is 131. is it true ?

So if all my assumptions are true, which share price i need to take to calculate my share profit ( which i got 3.)
 

DanPickUp

Well-Known Member
#6
Hi All.

We have an exam tomorrow about equity options. I am confused about something and i wanna ask u a question.


Ex-1

Royal bak of Scotland

Share price :61

in January Call option is 10.5 and put option 9. Exercise price is 60.
in December Call option is 9.


Question is, if we buy straddle in january, call option in december and share.

So what is my net profit @ 100.


Thanks.
Hi bhdryzr

Your question is confusing and so you get confusing answers. You may first clear up this :

1. Exercise price : Is it the share price, at the moment you where filled or is it the strike price of the options you trade ?

2. Do you buy the whole straddle in January or do you leg in with the put and you already bought the call option and the share in December ?

DanPickUp
 
#7
Exercise price is not current share price i know that its name is exercise price but maybe it is strike price. ( current price is 61 and Exercise (strike) price is 60 )


For straddle i bought it january. and also i bought a call option in december. different months. and share as well.


and every month we need to calculate our profit @ 100 (new share price )
 

DanPickUp

Well-Known Member
#8
My Solution is ;

From share price my profit is +39

From in january Straddle profit is : 100 - 70.5 (call) = 29.5 and -9 (put) = +20.5

From in December Call option profit is :100-69 = +31

So net profit is 31 + 20.5 + 39 =80.5

so is it ture ?
Hi bhdryzr

Thanks for the answer in the last post. No to this one and this one is not really true. You made a little mistake, which every body could have made.

The net profit after your calculation would be 90.50 and not 80.50

Have a look : 31 + 20.5 = 51.50

51.50 + 39 = 90.50

No to your question about share prices. You write :

**I am Confused about share price. For Example After January Straddle; my straddle profit is 20.5 (@ 100 ) so my share price now 120.5. is it true ?**

The 20.50 is a profit you made with the options when they were sold when the spot price of the share was 100 and so you can close the book. There is no accumulate option profit on a share spot price ! Clear :)

The profit you made with the option, you not can add to the share price. Why ? Share is share and option is option. It is like an apple and and a banana. Two different things and you try to add them now. We then would have an "appnana", which not exist.

You have to lock at them as separate individual derivatives.

http://www.investopedia.com/terms/o/option.asp
http://www.investopedia.com/terms/s/shares.asp

Take care

DanPickUp
 

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