Three six-month call options are traded on Hogs will stock:
Exercise Price
Call Option Price
$ 90
$ 5
100
11
110
15
How would you make money by trading in Hogs will options? ( Hint: Draw a graph with the option price on the vertical axis and the ratio of stock price to exercise price on the horizontal axis. Plot the three Hogs will options on your graph. Does this fit with what you know about how option prices should vary with the ratio of stock price to exercise price?) Now look in the newspaper at options with the same maturity but different exercise prices. Can you find any money-making opportunities?
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