Question
In: Finance
Suppose that a March call option on a stock with a strike price of $50 costs...
Suppose that a March call option on a stock with a strike price of $50 costs $2.50 and is held until March. Under what circumstances will the option be exercised? Under what circumstances will the holder of the option make a gain? Under what circumstances will the seller of the option make a gain? What is the maximal gain that the seller of the option can make? Under what circumstances will the seller of the option make the maximal gain?
Solutions
Expert Solution
Since it is a call option, it will be exercised when the price will be greater than $50.
Seller will gain when the spot price will be greater than premium + strike price.
max gain of seller will be $2.50
Seller will make max gain when option is not exercised and he gets max premium.
jeff jeffy answered 1 year agoRelated Solutions
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Option Strike Price $ Call Option Price $ Put Option Price $ 45 10.00 1.00 50...
Option Strike Price $
Call Option Price $
Put Option Price $
45
10.00
1.00
50
5.00
2.00
55
1.50
3.00
60
1.00
7.50
Using the quotes from
the table above, an investor makes the following transactions:
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$55, and
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December Call with a strike price of $55.
If the stock
is selling for $62 per share, when the options expire, the
profit from the trades is
closest to a:
.
Multiple Choice...
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