od 2 PS (Problem Sets) Refer to the stock options on Apple in the Egure 210....

Question

Question

Answer 1

Answer #1

Value of 140 may call option = $3.80

Value of stock now = $152

Profit per call option = Value of stock now - (Strike Price + Value of call option) = 152 - (140 + 3.80) = 8.2

a-1. Since the profit is +ve, we will exercise the call option

a-2. Net Profit = Profit per call option * Number of shares = 8.2*100 = $820

a-3. Return = Net Profit / Initial Investment * 100 = 820 / (3.80*100) * 100% = 215.79%

Answer 2

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