Suppose you purchase one Texas Instruments August 75 call contract quoted at $8.50. If, at expiration,...
Suppose you purchase one Texas Instruments August 75 call contract quoted at $8.50. If, at expiration, the price of a share of Texas Instruments stock is $79, your profit would be _________. (Note: One contract consists of 100 options.)
A) 400 B) -400 C) 450 D) -450
Suppose you write one Texas Instruments August 80 call contract quoted at $6. If, at expiration, the price of a share of Texas Instruments stock is $79, your profit would be _________.
A) 500 B) -500 C) 600 D) -600
Homework Answers
The profit is computed as shown below:
= ($ 79 - $ 75 - $ 8.50) x 100
= - $ 450
So the correct answer is option D i.e. - 450
The profit is computed as shown below:
= $ 79 - $ 80 - $ 6
= - $ 7
But the maximum loss is restricted to the call premium of $ 6 in case of a call buyer
Further the loss incurred by a call buyer is the profit earned by a call writer, hence the correct answer is
= $ 6 x 100
= $ 600
So the correct answer is option C i.e 600
Feel free to ask in case of any query relating to this question
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Suppose you purchase one Texas Instruments August 75 call
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