What is the spread between the high and low target stock prices, expressed as a percentage of Coca Cola’s current stock price (use previous close)? The spread is the difference between the analyst high price target and the analyst low price target – find them in the analyst research tab. How should the spread be related to the price at which Coca Cola’s options trade? (refer to Table 16.1 page 522) when constructing your answer).
What is the average 12-month target price for Coca-Cola? Based on this forecast, would at-the-money calls or puts have the higher expected profit?
Go to the option chain tab, what is the implied volatility (impvol) of the call option closest to the money with time to expiration of about three months. You can use the impvol on the same date as in part a).
Now repeat the steps a) b) c) & d) for Pepsi (ticker: PEP).
Suppose you believe that the volatility of KO is higher than currently anticipated levels. Would its call options be overpriced or underpriced?
Could you take positions in both calls and puts on KO in such a manner as to speculate on your volatility beliefs without taking a stance on whether the stock price is going to increase or decrease? Would you buy or write each type of option?
How would your relative positions in puts and calls be related to the delta of each option?