Exercise
For each of the following options quotes, fill in the blanks. Note that both corn and wheat contracts are 5,000 bushels.
1. Long DEC Wheat 442’4 Call @ 10’0
Premium: _____ _____
Breakeven point: _____
Maximum gain: _____
Maximum loss: _____
2. Short DEC Wheat 462’2 Call @ 12’0
Premium: _____ _____
Breakeven point: _____
Maximum gain: _____
Maximum loss: _____
3. Short Sep Corn 322’4 Put @ 15’0
Premium: _____ _____
Breakeven point: _____
Maximum gain: _____
Maximum loss: _____
4. Long Sep Corn 336’6 Put @ 14’2
Premium: _____ _____
Breakeven point: _____
Maximum gain: _____
Maximum loss: _____
Answers
1. Premium: Paid; $500
Breakeven point: 452’4 ($4.5250)
Maximum gain: Unlimited
Maximum loss: $500
2. Premium: Received; $600
Breakeven point: 474’2 ($4.7425)
Maximum gain: $600
Maximum loss: Unlimited
3. Premium: Received; $750
Breakeven point: 307’4 ($3.0750)
Maximum gain: $750
Maximum loss: Unlimited
4.