Fatima – The Growth Investor at Bourse Bay

Fatima is executing a high-conviction bearish strategy on a pharmaceutical company (Symbol: PHARMA) that she anticipates will have negative clinical trial results. She is purchasing put options to maximize her potential gains if the stock price falls dramatically.

Fatima purchases 4 European put option contracts on PHARMA.

The contract details are:

• Strike Price: $79

• Premium Paid: $1.33

• Contract Size Assumption: Each option contract represents 100 shares of the underlying stock.

Question:

Based on this trade, what is the maximum possible profit Fatima can earn from this position?

(Assume the stock price can fall to zero and ignore transaction costs. Express your answer in dollars.)

Fatima – The Growth Investor at Bourse Bay

Fatima is executing a high-conviction bearish strategy on a pharmaceutical company (Symbol: PHARMA) that she anticipates will have negative clinical trial results. She is purchasing put options to maximize her potential gains if the stock price falls dramatically.

Fatima purchases 2 European put option contracts on PHARMA.

The contract details are:

• Strike Price: $110

• Premium Paid: $1.2

• Contract Size Assumption: Each option contract represents 100 shares of the underlying stock.

Question:

Based on this trade, what is the maximum possible profit Fatima can earn from this position?

(Assume the stock price can fall to zero and ignore transaction costs. Express your answer in dollars.)

Fatima – The Growth Investor at Bourse Bay

Fatima is executing a high-conviction bearish strategy on a pharmaceutical company (Symbol: PHARMA) that she anticipates will have negative clinical trial results. She is purchasing put options to maximize her potential gains if the stock price falls dramatically.

Fatima purchases 3 European put option contracts on PHARMA.

The contract details are:

• Strike Price: $70

• Premium Paid: $8.92

• Contract Size Assumption: Each option contract represents 100 shares of the underlying stock.

Question:

Based on this trade, what is the maximum possible profit Fatima can earn from this position?

(Assume the stock price can fall to zero and ignore transaction costs. Express your answer in dollars.)

Maryam – The Risk Analyst at Bahrain Financial

Maryam, a risk analyst, is reviewing a defensive options strategy designed to protect a portfolio from a downside movement in a pharmaceutical stock. She is evaluating a European put option purchased by the client.

The contract details are as follows:

• Premium paid: $6.01

• Exercise (Strike) price: $185

Question:

Based on the terms of the contract, at what stock price at expiration would the investor break even on this put option investment?

(Ignore transaction costs. Round your answer to two decimal places.)

Jassim – The Market Strategist at Arcapita Investment

Jassim is developing a bullish strategy for a global retail company stock (Symbol: RETAIL) using call options. He is summarizing the required break-even point for his junior analysts.

The contract details are as follows:

• Premium paid (Call Last): $7.31

• Exercise (Strike) price: $167

Question:

Based on the terms of the contract, at what stock price at expiration would the investor break even on this call option position?

(Ignore transaction costs. Round your answer to two decimal places.)

Omar – The Junior Trader at Gulf Investment Group

Omar, a Junior Trader, is analyzing the derivatives market for large-cap tech stocks and is focused on setting up a bearish (decline-anticipating) position on Microsoft Corporation (MSFT). He is reviewing the current exchange-listed options quotes for his final training assessment.

Assumptions:

1. Each option contract represents 100 shares of the underlying stock.

2. Transaction costs and bid-ask spreads are ignored for simplification.

Question:

As part of a directional strategy anticipating a decline in Microsoft's stock price, how much total capital would Omar need to allocate to purchase 4 put option contract at the quoted strike price?