Suppose you write 40 call option contracts with a $40 strike. The premium is $3.03. Evaluate...
Suppose you write 40 call option contracts with a $40 strike. The premium is $3.03. Evaluate your potential gains and losses at option expiration for stock prices of $30, $40, and $50. (Input all amounts as positive values. Do not round intermediate calculations.)
At stock price of 30, the ____. is _____
At stock price of 40, the ____. is _____
At stock price of 50, the ____. is _____
Homework Answers
rate positively ..
| Gain or (loss) on call writing = Premium received - (Max of (stock price - strike price,0) | |||||||
| Stock price | Profit/(loss) | ||||||
| 30 | 3.03 | 3.03-max of(30-40,0) | |||||
| 40 | 3.03 | 3.03-max of(40-40,0) | |||||
| 50 | -6.97 | 3.03-max of(50-40,0) | |||||
| Solution - | |||||||
| At stock price of 30, the _Profit___. is __$3.03___ | |||||||
| At stock price of 40, the __Profit__. is _$3.03____ | |||||||
| At stock price of 50, the _Loss___. is $6.97_____ | |||||||
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