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Options, Futures, and Other Derivatives | 9th Edition | ISBN: 9780133456318 | Authors: John C. Hull
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The strike price of a futures option is 550 cents, the risk-free interest rate is 3%

Chapter 18, Problem 18.28

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QUESTION:

The strike price of a futures option is 550 cents, the risk-free interest rate is 3%, the volatility of the futures price is 20%, and the time to maturity of the option is 9 months. The futures price is 500 cents. (a) What is the price of the option if it is a European call? (b) What is the price of the option if it is a European put? (c) Verify that putcall parity holds. (d) What is the futures price for a futures-style option if it is a call? (e) What is the futures price for a futures-style option if it is a put?

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QUESTION:

The strike price of a futures option is 550 cents, the risk-free interest rate is 3%, the volatility of the futures price is 20%, and the time to maturity of the option is 9 months. The futures price is 500 cents. (a) What is the price of the option if it is a European call? (b) What is the price of the option if it is a European put? (c) Verify that putcall parity holds. (d) What is the futures price for a futures-style option if it is a call? (e) What is the futures price for a futures-style option if it is a put?

ANSWER:

Step 1 of 6

Strike price decides buying and selling condition of derivative options. The strike price is relevant to call or put options.  This price determines the option’s value in the deal.

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