You purchase 14 call option contracts with a strike price of $80 and a premium of $1.80. Assume the stock price at expiration is $92.00.
a. What is your dollar profit?
b. What is your dollar profit if the stock price is $77.95? (A negative value should be indicated by a minus sign. Do not round intermediate calculations.)
f the stock price is $77.95, the call is | , so the dollar profit is |
(a) Strike Price = $ 80 and Price at Expiry = $ 92, It is assumed that each call option is for 100 stocks
Number of Options Bought = 14 and Payoff Per Option = (92 - 80) x 100 = $ 1200
Total Pay Off = 12 x 14 x 100 = $ 16800 and Premium per Option = $ 1.8
Total Premium Paid = 1.8 x 14 x100 = $ 2520
Net Payoff = $ Profit = (16800 - 2520) = $ 14280
(b) If the stock price is $ 77.95, the call option will not be exercised as the strike price is above the underlying asset's price and hence option payoff = $ 0
Net Payoff = $ Profit = 0 - 25 20 = - $ 2520 (negative sign indicates $ loss)
You purchase 14 call option contracts with a strike price of $80 and a premium of...
You purchase 14 call option contracts with a strike price of $80 and a premium of $1.80. Assume the stock price at expiration is $92.00. a. What is your dollar profit? (Do not round intermediate calculations.) Dollar profit $ b. What is your dollar profit if the stock price is $77.95? (A negative value should be indicated by a minus sign. Do not round intermediate calculations.) If the stock price is $77.95, the call is worthless , so the...
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