Question

You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months The current price of the sto $63 per share. You want to establish a bullish money spread to help limit the cost of your option position You fnd the following option quotes Wildwoood Corp Underlying Stock price: $63.80 Expiration June June June Strike Call 58.00 63.00 5.15 68.88 2.65 Put 9.80 3.30 4.30 8.80 Ignoring commissions, the cost to establish the bull money spread with calls would be Multiple Choice $465

Answer 1

Bull call spread involves buying of call option at lower exercise price and selling of call option at higher exercise price.

Cost of the option = Premium paid at lower exercise price - Premium received at Higher exercise price

= 9.80 - 2.65 = 7.25

Total cost = No of contracts * 7.25