Question

Question Status 4.45 PM Johanna places a combination trade as follows: she buys one share of VanHoute long for $10.80 and at the same ime she buys a call on VanHoutte that has an exercise price of $10.30 and a premium of $1.60. hat is the proft or loss on the TWO trades COMBINED at the ime of expiraton of the call option VanHoue is trading at $12.50 per share? Assume that she gets out of her long position at the same tme her opion expires $ Place your answer with dolars and cents without a dollar sign. Enter negative answers with a minus" sign For example, f your answer is negative two dollars and seventy fve cents, then enter -275 SUBMIT ANSWER

johanna places a combination trade as follows: she buys one share of Vanhoutte long for $10.80 and at the same she buys a call ok Vanhoutte that has an exercise price of $10.30 and a premium of $1.60. What is the profit or loss on the tw trades COMBINED if at the time of expiration of the call option Vanhoutte is trading at $12.50 per share? Assume that she gets out of her long positiom at the same time her option expires

Answer 1

Gain on selling the share long = 12.5-10.8=$1.7

The call option will not be exercised since the price has increased. Hence there is a cost of the premium paid on the option of $1.6

Net Gain/(loss) = 1.7-1.6=$ 0.1