Using the following tables to answer the following questions.

TABLE 1

C (CITIGROUP INC) / 14.35-0.89
Sep 16, 2008 @ 10:14 ET /
Bid 14.35 Ask 14.36 Size 13x40 Vol 33660766
Calls / Last Sale / Net / Bid / Ask / Vol / Open Int / Puts / Last Sale / Net / Bid / Ask / Vol / Open Int
08 Sep 10.00 (C IB-E) / 4.65 / -0.80 / 4.55 / 4.65 / 50 / 1001 / 08 Sep 10.00 (C UB-E) / 0.17 / +0.07 / 0.17 / 0.18 / 1557 / 71497
08 Sep 12.50 (C IZ-E) / 2.48 / -0.82 / 2.41 / 2.49 / 614 / 2857 / 08 Sep 12.50 (C UZ-E) / 0.52 / +0.26 / 0.51 / 0.53 / 1845 / 59865
08 Sep 15.00 (C IC-E) / 0.80 / -0.45 / 0.76 / 0.82 / 962 / 12146 / 08 Sep 15.00 (C UC-E) / 1.35 / +0.61 / 1.35 / 1.40 / 6940 / 157380
08 Sep 17.50 (C IR-E) / 0.14 / -0.12 / 0.14 / 0.16 / 1011 / 57962 / 08 Sep 17.50 (C UR-E) / 3.25 / +1.05 / 3.20 / 3.25 / 778 / 123636
08 Oct 10.00 (C JB-E) / 6.35 / 0.0 / 5.45 / 5.60 / 0 / 1284 / 08 Oct 10.00 (C VB-E) / 1.11 / +0.41 / 1.06 / 1.14 / 4031 / 26075
08 Oct 12.50 (C JZ-E) / 3.70 / -0.50 / 3.60 / 3.75 / 2 / 458 / 08 Oct 12.50 (C VZ-E) / 1.65 / +0.49 / 1.70 / 1.77 / 1297 / 33174
08 Oct 15.00 (C JC-E) / 2.12 / -0.38 / 2.17 / 2.26 / 234 / 3398 / 08 Oct 15.00 (C VC-E) / 2.75 / +0.75 / 2.73 / 2.79 / 1819 / 45733
08 Oct 17.50 (C JR-E) / 1.17 / -0.13 / 1.16 / 1.19 / 599 / 17400 / 08 Oct 17.50 (C VR-E) / 4.25 / +1.00 / 4.20 / 4.30 / 309 / 49083

TABLE 2

C (CITIGROUP INC) / 15.66+0.42
Sep 16, 2008 @ 12:32 ET /
Bid 15.63 Ask 15.64 Size 15x114 Vol 130134024
Calls / Last Sale / Net / Bid / Ask / Vol / Open Int / Puts / Last Sale / Net / Bid / Ask / Vol / Open Int
08 Sep 12.50 (C IZ-E) / 2.87 / -0.43 / 3.30 / 3.40 / 1077 / 2857 / 08 Sep 12.50 (C UZ-E) / 0.28 / +0.02 / 0.26 / 0.29 / 6678 / 59865
08 Sep 15.00 (C IC-E) / 1.35 / +0.10 / 1.28 / 1.34 / 4846 / 12146 / 08 Sep 15.00 (C UC-E) / 0.74 / 0.0 / 0.71 / 0.76 / 21944 / 157380
08 Sep 17.50 (C IR-E) / 0.23 / -0.03 / 0.22 / 0.24 / 7117 / 57962 / 08 Sep 17.50 (C UR-E) / 2.40 / +0.20 / 2.15 / 2.20 / 4726 / 123636
08 Sep 20.00 (C ID-E) / 0.04 / -0.01 / 0.02 / 0.05 / 1090 / 154008 / 08 Sep 20.00 (C UD-E) / 4.35 / -0.20 / 4.40 / 4.50 / 969 / 100991
08 Oct 12.50 (C JZ-E) / 4.60 / +0.40 / 4.25 / 4.35 / 36 / 458 / 08 Oct 12.50 (C VZ-E) / 1.22 / +0.06 / 1.20 / 1.24 / 3607 / 33174
08 Oct 15.00 (C JC-E) / 2.59 / +0.09 / 2.60 / 2.63 / 967 / 3398 / 08 Oct 15.00 (C VC-E) / 2.02 / +0.02 / 2.02 / 2.07 / 3778 / 45733
08 Oct 17.50 (C JR-E) / 1.40 / +0.10 / 1.38 / 1.41 / 5404 / 17400 / 08 Oct 17.50 (C VR-E) / 3.15 / -0.10 / 3.25 / 3.35 / 1251 / 49083
08 Oct 20.00 (C JD-E) / 0.65 / +0.06 / 0.62 / 0.66 / 1896 / 34540 / 08 Oct 20.00 (C VD-E) / 4.90 / -0.10 / 5.00 / 5.10 / 127 / 31671

TABLE 3

C (CITIGROUP INC) / 15.75+0.51
Sep 16, 2008 @ 21:01 ET /
Bid 16.25 Ask 16.29 Size 77x7 Vol 257367449
Calls / Last Sale / Net / Bid / Ask / Vol / Open Int / Puts / Last Sale / Net / Bid / Ask / Vol / Open Int
08 Sep 12.50 (C IZ-E) / 3.50 / +0.20 / 3.40 / 3.55 / 1097 / 2857 / 08 Sep 12.50 (C UZ-E) / 0.09 / -0.17 / 0.07 / 0.09 / 7447 / 59865
08 Sep 15.00 (C IC-E) / 1.30 / +0.05 / 1.21 / 1.30 / 8682 / 12146 / 08 Sep 15.00 (C UC-E) / 0.38 / -0.36 / 0.33 / 0.39 / 34248 / 157380
08 Sep 17.50 (C IR-E) / 0.21 / -0.05 / 0.15 / 0.20 / 11971 / 57962 / 08 Sep 17.50 (C UR-E) / 1.76 / -0.44 / 1.73 / 1.84 / 7207 / 123636
08 Sep 20.00 (C ID-E) / 0.03 / -0.02 / 0.03 / 0.05 / 3398 / 154008 / 08 Sep 20.00 (C UD-E) / 4.02 / -0.53 / 4.05 / 4.25 / 1293 / 100991
08 Oct 12.50 (C JZ-E) / 4.50 / +0.30 / 4.35 / 4.50 / 69 / 458 / 08 Oct 12.50 (C VZ-E) / 1.07 / -0.09 / 1.01 / 1.07 / 5341 / 33174
08 Oct 15.00 (C JC-E) / 2.69 / +0.19 / 2.65 / 2.72 / 2446 / 3398 / 08 Oct 15.00 (C VC-E) / 1.76 / -0.24 / 1.74 / 1.80 / 5641 / 45733
08 Oct 17.50 (C JR-E) / 1.41 / +0.11 / 1.34 / 1.41 / 7346 / 17400 / 08 Oct 17.50 (C VR-E) / 3.00 / -0.25 / 2.93 / 3.00 / 2321 / 49083
08 Oct 20.00 (C JD-E) / 0.58 / -0.01 / 0.57 / 0.62 / 2747 / 34540 / 08 Oct 20.00 (C VD-E) / 4.80 / -0.20 / 4.60 / 4.75 / 208 / 31671

TABLE 4

C (CITIGROUP INC) / 20.65+4.00
Sep 20, 2008 @ 09:36 ET /
Bid 20.00 Ask 20.54 Size 35x3 Vol 265457511
Calls / Last Sale / Net / Bid / Ask / Vol / Open Int / Puts / Last Sale / Net / Bid / Ask / Vol / Open Int
08 Sep 17.50 (C IR-E) / 2.79 / +2.49 / 2.79 / 3.05 / 10785 / 80622 / 08 Sep 17.50 (C UR-E) / 0.01 / -1.09 / 0.0 / 0.01 / 3103 / 98889
08 Sep 20.00 (C ID-E) / 0.38 / +0.34 / 0.25 / 0.38 / 28289 / 132763 / 08 Sep 20.00 (C UD-E) / 0.02 / -3.48 / 0.02 / 0.04 / 13402 / 91747
08 Sep 22.50 (C IA-E) / 0.02 / 0.0 / 0.0 / 0.01 / 17882 / 112043 / 08 Sep 22.50 (C UA-E) / 2.11 / -4.39 / 2.15 / 2.30 / 4600 / 52929
08 Sep 25.00 (C IE-E) / 0.01 / 0.0 / 0.0 / 0.03 / 5938 / 97936 / 08 Sep 25.00 (C UE-E) / 4.80 / -5.50 / 4.45 / 5.05 / 7 / 15200
08 Oct 17.50 (C JR-E) / 3.20 / +1.80 / 3.20 / 3.90 / 6826 / 31867 / 08 Oct 17.50 (C VR-E) / 0.87 / -1.30 / 0.94 / 0.96 / 3001 / 50689
08 Oct 20.00 (C JD-E) / 1.83 / +1.28 / 1.82 / 1.99 / 9188 / 35943 / 08 Oct 20.00 (C VD-E) / 1.70 / -2.30 / 1.65 / 1.75 / 5214 / 29323
08 Oct 22.50 (C JA-E) / 0.77 / +0.57 / 0.76 / 0.80 / 7542 / 27103 / 08 Oct 22.50 (C VA-E) / 3.10 / -4.60 / 2.94 / 3.60 / 727 / 2466
08 Oct 25.00 (C JE-E) / 0.38 / +0.35 / 0.35 / 0.45 / 3608 / 4343 / 08 Oct 25.00 (C VE-E) / 5.00 / -5.80 / 5.05 / 6.05 / 201 / 947

1. ( 5 points) Referring to Table 1, why the difference in the premiums on an Oct 12.50 call vs. the Sept 15 call? State which option is more expensive and why (give 2 specific reasons).

2. ( 5 points) Referring to Table 1, suppose you found a Sept 12.50 call outside of class and picked it up (its free!!). If you exercised it (use Table 1 for all info), how much money would you make / lose? Please show all work.

3. ( 5 points) If instead of exercising as above, you decided to put the call that you found outside of class on Ebay. Do you think you could sell it for more money than you made when you exercised it.? Why or why not. Explain

4. ( 5 points) Suppose you are bullish on C and purchase 100 Sept 15 calls (see Table 1). How much would they cost and what would they collectively give you the right to do?

5. ( 5 points) If these options expired with the spot price associated with Table 3, what could you sell each one of these 100 options for (assume that markets are functioning well with lots of liquidity)?That is, what would be the premium for each option contract?

2) (25 points for completely labeled graph – 5 points off for each blemish!)As we did in class, graphically illustrate the profit/loss function of the 100 Sept 15.00 calls that you purchased on Sept. 16 (Table 1), clearly labeling the out of the money spot, at the money spot, in the money spot, and the break even point (this is all relative to the 100 Sept 15.00 calls). Label the horizontal line in your graph as spot at expiration. For your diagram, use a price range of 12 - 25 and be sure to label, on the vertical axis, the profit loss associated with the three distinct scenarios below.

Scenario 1): the spot price of C stays the same as in Table 1 and your option expires. Locate this point on your diagram as point A, clear labeling the profit or loss associated with this scenario.

Scenario 2): the spot price of C rises to the price associated with Table 2 and expires that way and you exercise your option. Locate the specific profit or loss on your diagram and label as point B.

Scenario 3): the spot price of C rises to the price associated with Table 4 and expires that way and you exercise your option. Locate the specific profit or loss on your diagram and label as point C.

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