You purchase a put option on july crude oil with a strike, Ask an Expert

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You purchase a put option on July Crude Oil with a strike price of $72/barrel. The premium on the option is $5/barrel. The July crude futures contract is currently trading at $70/barrel. The contract size for crude oil is 1000 barrels.

a. What is the current intrinsic value of the option?

b. What price must July Crude reach for you to break even if you exercise the option?

c. The price of July Crude decreases to $62 per barrel at the same time the premium for a July Crude put option increases to $10/barrel. What is your total profit or loss if you sell your option?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92866375

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