MFIN 902
Managerial Finance II

Homework / February 2014

OPTIONS
REAL‐TIME DATA ANALYSIS

Student : Emre ŞEN
No : 20130334

OPTIONS REAL-TIME DATA ANALYSIS February 2014

MFIN 902 / Managerial Finance II Page 2 / 5

I have chosen Cisco Systems, Inc. (CSCO) with the following introduction and stock performance for
last one year.

Services Offered By CISCO
 Routing
 TelePresence
 Wireless LAN
 Switching
 Web Conferencing
 x86 Blade Servers
 Storage Area Networks

Revenues

Annual Earnings and Estimates

N

Se

OPTIONS REAL-TIME DATA ANALYSIS February 2014

MFIN 902 / Managerial Finance II Page 3 / 5

Answer A

I have chosen Cisco Systems, Inc. (CSCO)

Answer a.

Stock: CISCO
S (Current Stock Price) : 22.32
Option Maturity : January 2016

Strike Call Option Put Option
Price Price Price

13.00 9.3 0.35

15.00 7.35 0.64

18.00 4.75 1.4

20.00 3.45 2.18

22.00 2.47 3.2

25.00 1.38 5.15

27.00 0.93 6.65

30.00 0.51 9.2

32.00 0.34 11

35.00 0.19 13.65

According to the table and graph above, as strike (exercise) price increases;
 Call option values decreases
 Put option values increases

0

2

4

6

8

10

12

14

16

 13.00  15.00  18.00  20.00  22.00  25.00  27.00  30.00  32.00  35.00

O
p
ti
o
n
 P
ri
ce
 (
U
SD

)

Strike Price (USD)

Call Option

Put Option

OPTIONS REAL-TIME DATA ANALYSIS February 2014

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Answer B

Strike Price
Call Options Put Options

Mar-14 May-14 Oct-14 Mar-14 May-14 Oct-14

17.00   5.30 5.30 6.10 0.00 0.03 0.21

18.00   4.30 4.35 4.40 0.00 0.07 0.34

19.00   3.30 3.35 3.50 0.00 0.13 0.52

20.00   2.34 2.48 2.75 0.03 0.26 0.78

21.00   1.41 1.68 2.08 0.09 0.49 1.13

22.00   0.66 1.04 1.51 0.33 0.86 1.59

23.00   0.21 0.58 1.06 0.88 1.41 2.14

24.00   0.05 0.29 0.71 1.70 2.11 2.81

25.00   0.01 0.13 0.46 2.67 2.93 3.55

26.00   0.00 0.05 0.29 3.65 3.85 4.35

The table and graphs above show that maturity means higher prices for both puts and calls.

OPTIONS REAL-TIME DATA ANALYSIS February 2014

MFIN 902 / Managerial Finance II Page 5 / 5

Answer C
Using the following variables

Option Maturity : May 2014

S : 22.32

Risk Free Rate : 0.10% (US Treasury 1 Year Bill)

N (3 months) : 0.25

Discount Factor : 0.99975

We will check if the following equation holds approximately

Put + Stock = Call + PV (Exercise)

Strike
Price

Call Put
Put+Stock  Call + PVX  Difference

May-14 May-14

17.00   5.30 0.03 22.35  22.30  0.05 

18.00   4.35 0.07 22.39  22.35  0.04 

19.00   3.35 0.13 22.45  22.35  0.10 

20.00   2.48 0.26 22.58  22.48  0.10 

21.00   1.68 0.49 22.81  22.67  0.14 

22.00   1.04 0.86 23.18  23.03  0.15 

23.00   0.58 1.41 23.73  23.57  0.16 

24.00   0.29 2.11 24.43  24.28  0.15 

25.00   0.13 2.93 25.25  25.12  0.13 

26.00   0.05 3.85 26.17  26.04  0.13 

According to the results above the equation holds.