# Tutorial Futures and Option - Answer

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• Published : May 12, 2013

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1. As an option writer, what is the best option to take when you forecast the market to be bullish? Sketch the profit/loss diagram and determine the in the money, out of the money and at the money. 2. The call option of Diamond Bhd stock has a striking price of RM30 and a cost of option RM2 per share with one month expiration date. The current market price of share is RM26. If you buy 3 lots (1 lots = 100 shares) of shares, calculate the profits or losses at the expiration date for each of the following prices: I. RM30

II. RM40
III. RM25
At RM30, SP = EP, ATM , do not to exercise –pay only premium SP| 30 x 300 = RM9,000|
EP| 30 x 300 = RM9,000|
Gross profit| 0 (ATM)|
Loss| = (RM600) |
At RM 40, SP >EP , ITM, exercise the option
SP| 40 x 300 = RM12,000|
EP| 30 x 300 = RM 9,000|
Gross profit| RM 3,000 (ITM)|
Profit| = RM2,400|
At RM 25, SP <EP , OTM, do not exercise
SP| 25 x 300 = RM7,500|
EP| 30 x 300 = RM 9,000|
Gross profit| RM1,500(ITM)|