Ask Question
1 February, 02:33

You purchased six TJH call option contracts with a strike price of $40 when the option was quoted at $1.30. The option expires today when the value of TJH stock is $41.90. Ignoring trading costs and taxes, what is your total profit or loss on your investm

+4
Answers (1)
  1. 1 February, 05:22
    0
    Profit = $0.60

    Explanation:

    Call option is an option to buy by paying a call premium. The option is exercised when current market price is more than the strike price. In this case, the strike price is $40 and the premium is $1.30, whereas the current market price is $41.90. The option buyer can exercise the contract by purchase the stock at lower price and sell at current market price to gain return. The gain will be calculated as:

    Value = Current Price - Strike Price

    Value = 41.90 - 40

    Value = 1.90

    To calculate the profit, we needs to subtract premium cost from value:

    Profit = Value - Call Premium

    Profit = 1.90 - 1.30

    Profit = $0.60
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “You purchased six TJH call option contracts with a strike price of $40 when the option was quoted at $1.30. The option expires today when ...” 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