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Homework answers / question archive / What would be the profit or loss per share of stock to an investor who bought the October maturity IBM call option with exercise price $100, if the stock price at the expiration of the option is $104? What about a purchaser of the put option with the same exercise price and maturity? call : 1
What would be the profit or loss per share of stock to an investor who bought the October maturity IBM call option with exercise price $100, if the stock price at the expiration of the option is $104? What about a purchaser of the put option with the same exercise price and maturity? call : 1.80 Put = 0.8
Excercise Price (X): $100
Share price at expiration (S) : $104
Call option: $ 1.80
Gross Profit on the call option buy: Share price at expiration - Excercise price
Gross Profit on the call option buy : $104 - $ 100 = $ 4 per share
Net profit on call option buy: Gross Profit on call - Call option price
Net profit on call option buy: $ 4 - $ 1.80 = $ 2.20 per share
(Note: The call buyer will excercise the call option because the price at expiration is above the excercise price and the differnece between the share price at expiration and excercise price will be the profit and the option premium paid for tha call option will be deducted to get the net profit of the call buy option.)
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Excercise Price (X): $100
Share price at expiration (S) : $104
Put option: $ 0.80
Gross profit or Loss on the put option buy: NIL
(NOTE: If the share price don't go below the excercise price, then put buyer will not excercise the put option and as a result there would be no profit or loss by put option. The only loss is the premium paid for the put option)
Net Loss on put option buy: Gross Profit or loss - Put option price
Net Loss on put option buy : NIL - $ 0.80 = $ 0.80
