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12
The price of a stock on July 1 is $57. A trader buys 100 call options on the stock with a strike price of $60 when the option price is $2. The options are exercised when the stock price is $65. The trader’s net profit is
A. $700
B.$500
C. $300
D.$600
A. $700
B.$500
C. $300
D.$600
Answer: C
The payoff from the options is 100×(65-60) or $500. The cost of the options is 2×100 or $200. The net profit is therefore 500−200 or $300.
The payoff from the options is 100×(65-60) or $500. The cost of the options is 2×100 or $200. The net profit is therefore 500−200 or $300.
Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015