Most Active Options on t = 22 October 2012

Option Option Closing Closing Change

Stock Stock Option from
Exercise Option Expiration Trading
Rank Ticker Price Price Previous
Price Call/Put Date Volume
Symbol (St) (Ct) Day (DCt)
(X) (T)
1 XLF 17.0 Call 17/Nov/12 16.11 0.06 0.01 433,998
2 SPY 143.0 Put 17/Nov/12 143.41 1.94 -0.23 89,617
3 QQQ 65.0 Put 17/Nov/12 66.02 0.81 -0.25 52,780
4 IWM 78.0 Put 17/Nov/12 81.83 0.54 -0.09 43,168
5 MSFT 29.0 Call 17/Nov/12 28.00 0.23 -0.20 36,371
6 HPQ 17.0 Put 18/May/13 14.71 3.23 -0.18 26,425
7 SLV 34.0 Call 17/Nov/12 31.39 0.15 0.01 26,250
8 UTX 72.5 Put 17/Nov/12 77.83 0.38 -0.01 24,515
9 FB 21.0 Call 17/Nov/12 19.32 0.78 0.10 24,390
10 INTC 22.0 Call 17/Nov/12 21.46 0.20 0.01 23,339
11 ECA 26.0 Call 17/Nov/12 23.02 0.18 -0.23 20,252
12 GE 22.0 Call 17/Nov/12 21.70 0.31 -0.15 19,603
13 BTU 16.0 Call 19/Jan/13 29.95 13.00 3.00 19,091
14 NLY 8.0 Put 17/Jan/15 15.94 0.66 0.05 16,771
15 CSCO 19.0 Call 17/Nov/12 18.19 0.36 0.00 16,654
16 AET 45.0 Call 17/Nov/12 44.20 1.26 0.35 16,486
17 EEM 41.0 Put 22/Dec/12 41.90 1.14 -0.22 15,454
18 MS 19.0 Call 17/Nov/12 17.45 0.14 -0.05 14,654
19 NXY 20.0 Put 22/Dec/12 24.14 0.77 0.27 14,645
20 FXI 37.0 Call 17/Nov/12 37.67 1.16 0.25 13,948
 Open
Description of Underlying Asset
Interest

2,358,344 Financial Select Sector SPDR Fund tracking index of financial stocks
1,803,974 SPDR S&P 500 ETF Trust tracking SP500 Index
759,554 PowerShares QQQ Trust, Series 1 (ETF) tracking Nasdaq 100
448,734 iShares Russell 2000 Index (ETF) tracking 2,000 small-cap domestic stocks
206,064 Microsoft
6,984 Hewlett-Packard
121,974 iShares Silver Trust (ETF) tracking silver price
22,674 United Technologies
183,944 Facebook
190,434 Intel
219,634 Encana Corpporation
227,984 General Electric
218,994 Peabody Energy Corporation
177,934 Annaly Capital Management (a REIT)
569,894 Cisco
22,004 Aetna
444,464 iShares MSCI Emerging Markets Indx (ETF) tracking MSCI emerging markets index
289,574 Morgan Stanley
71,564 Nexen (energy)
1,127,324 iShares FTSE/Xinhua China 25 Index (ETF) tracking 50 of the largest Chinese stocks
 Stock, Call, Put Profits

Profit Patterns from GP Stock, Its Call and Put

Initial GP stock price 40 <-- St

Terminal GP stock price 70 <-- ST

Profit from bought stock 30 <-- =B4-B3

Profit from shorted stock -30 <-- =-B4+B3

Call exercise price 40 <-- X

Call price 4 <-- Ct
Bought call profit 26 <-- =MAX(B4-B9,0)-B10
Written call profit -26 <-- =B10-MAX(B4-B9,0)

Put exercise price 40 <-- X

Put price 2 <-- Pt
Bought put profit -2 <-- =MAX(B14-B4,0)-B15
Written put profit 2 <-- =B15-MAX(B14-B4,0)
=B6 =B7 =B11 =B12 =B16
Terminal
Bought Shorted Bought Written Bought
Stock
Stock Stock Call Call Put
Price
30 -30 26 -26 -2
0 -4 4 38
5 -4 4 33
10 -4 4 28
15 -4 4 23
20 -4 4 18
25 -4 4 13
30 -4 4 8
35 -4 4 3
40 -4 4 -2
45 1 -1 -2
50 6 -6 -2
55 11 -11 -2
60 16 -16 -2
65 21 -21 -2
70 26 -26 -2
75 31 -31 -2

Page 3
 Stock, Call, Put Profits

12
Stock Profit

10

8
Profir

=B17
4
Written Terminal stock price, ST
Put
2
2 Bought Stock
-38 Shorted Stock
-33 0
-28 0 10 20 30 40 50 60 70 80
-23
-18
-13
-8
-3 30 Call Profit
2
2 20
2
2 10
2
Profit

2 0
2 0 10 20 30 40 50 60 70 80
2 -10
Terminal stock price, ST
-20

-30
Bought Call Written Call

Page 4
 Stock, Call, Put Profits

Put Profit
40

30

20

10
Profit

0
0 10 20 30 40 50 60 70 80
-10

-20 Terminal stock price, ST

-30 Bought Put

Written Put
-40

Page 5
 Hedge

Profit Pattern from Protective Put

Initial GP stock price = X 40 <-- St

Terminal GP stock price 30 <-- ST

Put exercise price 40 <-- X

Put price 2 <-- Pt

Terminal Profit from stock -10 <-- =B4-B3

Terminal Profit from put 8 <-- =MAX(B6-B4,0)-B7
Terminal Protective put profit -2 <-- =B10+B9
=B9 =B10 =E14+D14 or =B11
Terminal
Stock Put Protective
stock
profit profit put profit
price
-10 8 -2 <-- Data table header
0 -2
5 -2
10 -2
15 -2
20 -2
25 -2
30 -2
35 -2
40 -2
45 3
50 8
55 13
60 18
65 23
70 28

Profit Pattern from Covered Call

Call exercise price 40 <-- X
Call price 4 <-- Ct

Terminal Profit from Stock -10 <-- =B4-B3

Terminal Profit from Short Call 4 <-- =B35-MAX(B4-B34,0)
Terminal Covered Call Profit -6 <-- =B38+B37
=B37 =B38 =B39
Terminal Short Covered
Stock
Stock Call Call
Profit
Price Profit Profit
-10 4 -6 <-- Data table header 10
0 -36 5
5 -31
0
10 -26 0
15 -21 -5
20 -16 -10
Profit

25 -11
-15
-20
-25
Page 6
-30
-35
 5
0
0
Hedge -5
-10

Profit
-15
30 -6
35 -1 -20
40 4 -25
45 4 -30
50 4
-35
55 4
60 4 -40
65 4
70 4

Page 7
 Hedge

Protective Put Profit at Time T

40

table header 30

20

10
Profit

0
0 10 20 30 40 50 60 70 80
-10
Terminal stock price, ST
-20

Stock
-30 profit

-40

Covered Call Profit at Time T

table header 10
5
0
0 10 20 30 40 50 60 70 80
-5
-10
Profit

-15
-20 ST
-25
Page 8
-30
-35
 5
0
0 10 20 30 40 50 60 70 80
-5 Hedge
-10

Profit -15
-20 ST
-25
-30
-35
-40

Page 9
 Spread

Profit Pattern from A Bull Spread

Call price, XL = 40 4
Call price, XH = 50 2
Terminal stock price, ST 60

Profit from Short Call with XH = 50 -8 <-- =-(MAX(B5-50,0)-B4)

Profit from Long Call with XL = 40 16 <-- =MAX(B5-40,0)-4
Bull Spread Profit 8 <-- =B8+B7

Stock Long Bull

Price Short
X=40 Spread
ST X=50 Call
Call Profit
16 -8 8 <-- Data table header
0 -2
5 -2
10 -2
15 -2
20 -2
25 -2
30 -2
35 -2
40 -2
45 3
50 8
55 8
60 8
65 8
70 8

Profit Pattern from A Straddle

Call price with X = 40 13
Put price with X = 40 6
Terminal stock price, ST 60

Profit from Long Call with X = 40 7 <-- =(MAX(B35-40,0)-B33)

Profit from Long Put with X = 40 -6 <-- =MAX(40-B35,0)-B34
Straddle Profit 1 <-- =B38+B37

Stock Long
Price Long Straddle
X=40
ST X=40 Put Profit
Call
7 -6 1 <-- Data table header
5 16
10 11
15 6
20 1
25 -4

Page 10
 Spread

30 -9
35 -14
40 -19
45 -14
50 -9
55 -4
60 1
65 6
70 11
75 16

Profit Pattern from A Strangle

Call price with X = 50 4
Put price with X = 30 2
Terminal stock price, ST 60

Profit from Long Call with X = 50 6 <-- =(MAX(B65-50,0)-B63)

Profit from Long Put with X = 30 -2 <-- =MAX(30-B65,0)-B64
Strangle Profit 4

Stock Long
Price Long Strangle
X=50
ST X=30 Put Profit
Call
25
6 -2 4 <-- Data table header
5 19 20
10 14
15 9
15
20 4
25 -1
10
30 -6

Profit
35 -6
40 -6 5
45 -6
50 -6 0
0 10
55 -1
60 4 -5
65 9
70 14 -10
75 19

Page 11
 Spread

Bull Spread Profit

<-- Data table header 10 Long
X=40
Call
8 Short
X=50
Call
6 Bull
Spread
Profit
4
Profit

0 Terminal Stock Price, ST

0 10 20 30 40 50 60 70
-2

-4

Straddle Profit
20
<-- Data table header Long X=40
15 Call
Long X=40
10 Put
Straddle
5 Profit
0
0 10 20 30 40 50 60 70 80
-5
-10 Page 12

-15
 Long X=40
15 Call
Long X=40
10 Put
Spread
Straddle
5 Profit
0
0 10 20 30 40 50 60 70 80
-5
-10
-15
-20
-25

25
Strangle Profit
<-- Data table header
20

15

10
Profit

0
0 10 20 30 40 50 60 70 80
-5
ST
-10 Long X=50 Call Long X=30 Put
Strangle
Profit

Page 13
 A B C D E
1 PROPOSITION 1 − Higher Lower Bounds for Call Prices
2
3 Current stock price, S0 83
4 Option time to maturity, T 0.5 years
5 Option exercise price, X 80
6 Risk-free return, rF 10% nominal annual rate, continuously compounde
7
8 Naive minimum call price, Max(S0 - X, 0), or intrinsic value 3.0000 <-- =MAX(B3-B5,0)
9 Lower bound on option price, Max(S0 - EXP(-rFT)X, 0) 6.9016 <-- =MAX(B3-EXP(-B6*B4)*B5,0)
10
11
12 Naive Minimum Call Price
13 Data Table Header --> 3.00 0.125 0.250 0.375
14 0
15 10
16 20
17 30
18 40
19 50
20 60
21 Current Stock Price, S0 70
22 80
23 90
24 100
25 110
26 120
27 130
28 140
29 150
30
31
32 Proposition 1 - Lower Bound on Call Price
33 Data Table Header --> 6.90 0.125 0.250 0.375
34 0
35 10
36 20
37 30
38 40
39 50
40 60
41 Current Stock Price, S0 70
42 80
43 90
44 100
45 110
46 120
47 130
48 140
 A B C D E
49 150
 F G H I J K L M
1
2
3
4
5
6
al rate, continuously compounded
7
8
EXP(-B6*B4)*B5,0)9
10
11
12 Time to Maturity, T
13 0.500 0.625 0.750 0.875 1.000
14 Intrinsic Value
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32 Time to Maturity, T
33 0.500 0.625 0.750 0.875 1.000
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
 F G H I J K L M
49
PROPOSITION 3 − Lower Lower Bounds for Put Prices

Current stock price, S0 55

Option time to maturity, T 0.5
Option exercise price, X 80
Interest rate, rF 10%

Naive minimum put option price, Max(X - S0, 0) 25.0000 <-- =MAX(B5-B3,0)
Lower bound on put price, Max(EXP(-rFT)X - S0, 0) 21.0984 <-- =MAX(EXP(-B6*B4)*B5-B3,0)

Naive Minimum Put Price

Data Table Header --> 25.00 0.125 0.250 0.375
0
10
20
30
40
50
60
Current Stock Price, S0 70
80
90
100
110
120
130
140
150

Proposition 3 - Lower Bound on Put Price

Data Table Header --> 21.10 0.125 0.250 0.375
0
10
20
30
40
50
60
Current Stock Price, S0 70
80
90
100
110
120
130
140
150
B4)*B5-B3,0)

Time to Maturity, T
0.500 0.625 0.750 0.875 1.000

Time to Maturity, T
0.500 0.625 0.750 0.875 1.000
 A B C D E
1 PROPOSITION 4 − Put-Call Parity
2
3 Current stock price, S0 55
4 Option time to maturity, T 0.5
5 Option exercise price, X 60
6 Interest rate, rF 10%
7 Given Call price, C0 3.0000
8 Implied Put price, P0 5.0738 <-- =B7+B5*EXP(-B6*B4)-B3
9
This spreadsheet uses put-call parity to derive the put price
10 P0 from the call price C0, the interest rate rF, the time to
maturity T, and the exercise price X.