Question
In: Finance
An investor is committed to purchasing 100 shares of World Port Management stock in six months....
An investor is committed to purchasing 100 shares of World Port Management stock in six months. She is worried the stock price will rise significantly over the next six months. The stock is at $45 and she buys a six-month call with a strike of $50 for $250. At expiration the stock is at $54. What is the net economic gain or loss on the entire stock/option portfolio?
Why in this exercise we have to take into consideration the $45 stock price if the investor buy the call option for 50 and will exercise since the price increase to 54?
I think the investor will make a gain of 54-50)*100-250= 150.
The part I dont undertand is the first part of the solution where it is calculated (45-54)*100?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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