Fill This Form To Receive Instant Help
Homework answers / question archive / The price of a stock in January 2021 is $57
The price of a stock in January 2021 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 Select one: O a. None of these O b. $500 O c. $300 O d. $400 O e. $600
Call option entitles the buyer to enjoy the upside in the stock price from the strike price.
Excercise day pay off received = 100 options * ($65 - $60) = $ 500
Less: option premium paid = $ 2 * 100 = $ 200
Net Profit = $ 500 - $ 200 = $ 300
hence, option c. $ 300 is the correct answer.