Assume you are a corn buyer wanting to establish a buying price range. You purch
ID: 2765119 • Letter: A
Question
Assume you are a corn buyer wanting to establish a buying price range. You purchased a $3.70
December Corn call for $0.28 and sold a $3.20 December Corn put for $0.06. The expected basis is 35
cents under the December futures price (-$0.35).
What is your buying price range?
Ceiling price ___3.57__________________ Floor price _____3.07_________________
What is the gain or loss on the $3.70 call option you purchased if:
(Assume it is at expiration and there is no remaining time value)
Futures price is: Call gain/loss (clearly label your answer as a gain or loss)
$3.05 ___.28 loss___________
$3.70 _____.28 loss_________
$4.35 ____________.37 gain__
What is the gain or loss on the $3.20 put option you sold if:
(Assume it is at expiration and there is no remaining time value)
Futures price is: Put gain/loss (clearly label your answer as a gain or loss) Please hsow work for reference.
$3.05 ______________
$3.70 ______________
$4.35 ______________
Explanation / Answer
Sold a $3.20 December Corn put for $0.06.
What is the gain or loss on the $3.20 put option you sold if:
(Assume it is at expiration and there is no remaining time value)
Futures price is: Put gain/loss (clearly label your answer as a gain or loss) Please show work for reference.
$3.05: the option will be exercised as it is in the money, the gain/less = 3.20 - 3.05 - put price = 3.20 - 3.05 - 0.06 =$ 0.09 (gain)
$3.70: Put gain/loss at this price the put option will not be exercised so the loss is limited to the put price therefor $ .06 (Loss)
$4.35: Put gain/loss at this price the put option will not be exercised so the loss is limited to the put price therefor $ .06 (Loss)