Question

You have been following stocks of PayPal (PYPL) and feel somewhat bullish in the short term. You decided to trade this stock using options, specifically using a Money call spread. You bought one of the $200 PYPL call options contract with a premium of $12.55 and sold one of the $220 call options contract with a premium of $6. You kept this position until the expiration date when PayPal stock sells for $223.75, at that point you have a profit of $_____________ from this transaction.

Answer 1

You kept this position until the expiration date when PayPal stock sells for $223.75, at that point you have a profit of
=1*100*(MAX(223.75-200,0)-12.55)-1*100*(MAX(223.75-220,0)-6)
=1345.0000
from this transaction