If, for a $1000 premium, you buy a $100,000 call option on bond futures with a...
If, for a $1000 premium, you buy a $100,000 call option on bond futures with a strike price of 110, and at the expiration date the price is 114 (Explain)
(a) your profit is $4000. (b) your loss is $4000. (c) your profit is $3000. (d) your loss is $3000. (e) your loss is $1000.
Homework Answers
Suppose, the price of the bond future currently is $100.
We have $100,000/100 = 1000 bond futures
On the date of expiration, call options profit when the price is greater than the strike price,
We are profiting 1000 * ($114-$110)
= $4000
The total amount of premium paid is $1000,
Hence,the net profit is $4000 - $1000 = $3,000
So, the correct option is option c.
Add Answer to:
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