A 1-week European at-the-money call option on the Apple stock is trading at $4. An investor buys an Apple stock and shorts the call at their market prices. What is this investor's maximum gain at the option maturity? Provide your answer in unit of dollars without the dollar sign.
The call option is trading at the money.
It means the strike price = market price.
The investors write a call option at $4. It means he will get $4 as a premium & he will have to pay the difference between new market price and strike price ($75) if the stock goes above $75.
As he also owns share buy buying at $75, it will net off the option loss if the price goes above $75.
So the maximum gain he will have is the option premium received ($4).
Maximum gain =$4.
A 1-week European at-the-money call option on the Apple stock is trading at $4. An investor...