Ask Question
20 August, 12:17

A customer sells 1 ABC Feb 40 Call @ $7 when the market price of ABC is $39. The stock moves to $50 and the customer is assigned. The stock is bought in the market for delivery. The gain or loss to the writer is:

A. $300 gain

B. $300 loss

C. $700 loss

D. $1,100 loss

+2
Answers (1)
  1. 20 August, 16:12
    0
    B) $300 loss

    Explanation:

    The seller of the call must sell the stock at $40. Since the seller received $7 per stock in order to write the call, his total revenue = $40 + $7 = $47 per stock. Since the stock's price is $50, the seller of the call will lose $3 per stock ( = $50 - $47).

    Since every call option includes 100 stocks, the total loss = $3 per stock x 100 stocks = $300 loss
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “A customer sells 1 ABC Feb 40 Call @ $7 when the market price of ABC is $39. The stock moves to $50 and the customer is assigned. The stock ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers