Question

In: Finance

4. Premium received from sale of the call is $0.01, X = $0.76, S = $$0.82....

4. Premium received from sale of the call is $0.01, X = $0.76, S = $$0.82. The size of the call is 50,000 units. What is the net profit for the seller of call option?

5. Premium received from sale of the put is $0.03, X = $0.75, S = $$0.72. The size of the put is 50,000 units. What is the net profit for the seller of put option?

Expert Solution

Solution:

4) Given Details,

(All amounts in $)

Premium =0.01 , Share Price =0.82 , Strike Price= .76

so,

Net Profit = { ( Share Price - Strike Price) - Premium} * Number of units

={(0.82 - 0.76) - 0.01} * 50,000

={0.06 - 0.01} * 50,000

=0.05 * 50,000

=2,500

Net Profit =25,00

5)

Given Details,

(All amounts in $)

Premium =0.03 , Share Price =0.72 , Strike Price= .75

so,

Net Profit = { ( Strike Price - Share Price ) - Premium} * Number of units

={(0.75 - 0.72) - 0.03} * 50,000

={0.03 - 0.03} * 50,000

=0

Net profit = 0

jeff jeffy answered 2 years ago

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