 |  Investments, 4th Canadian Edition, 4/e Zvi Bodie,
Boston University School of Management
Alex Kane,
University of California, San Diego
Alan Marcus,
Boston College
Stylianos Perrakis,
Concordia University
Peter Ryan,
University of Ottawa
Options and Other Derivatives: Introduction
Internet Exercises| Prepared by William Lim, University of New Brunswick. Go to http://moneycentral.msn.com/investor and get a quote for Nortel Networks (NT). Once you have the quote, request the information on options by clicking on “Options” in the menu on the left of the screen. You will be able to access the prices and market characteristics for all put and call options for NT. Select the two expiration months that follow the closest expiration month and obtain the prices for the calls and puts that are closest to being at the money. For example, if you are in July, you would select the September and December expirations. If the price of NT was $0.90, you would choose the options with the $2.50 strike or exercise price. Answer the following questions. - What are the prices for the put and call with the nearest expiration date?
- What would be the cost to put on a straddle using the above options?
- At expiration, what would be the breakevens on stock for the above straddle?
- What would be the percentage increase or decrease required to breakeven?
- What are the prices for the put and call with the later expiration date?
- What would be the cost to put on a straddle using the later expiration date?
- At expiration, what would be the breakevens on stock for the above straddle?
- What would be the percentage increase or decrease required to breakeven?
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2003 McGraw-Hill Higher Education