You purchase 12 call option contracts with a strike price of $50 and a premium o

Question

You purchase 12 call option contracts with a strike price of $50 and a premium of $3.80. Assume the stock price at expiration is $59.12.

What is your dollar profit? (Do not round intermediate calculations. Omit the "$" sign in your response.)

What if the stock price is $45.07? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Omit the "$" sign in your response.)

, so the dollar return is $ .

What is your dollar profit? (Do not round intermediate calculations. Omit the "$" sign in your response.)

Explanation / Answer

1. Dollar profit = ($59.12-$3.80-$50)×12 = $63.84

2. Since, share price is less than the strike price, option will not be exercised. So entire premium paid is loss. i.e. total dollar return will be -$45.60

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