Suppose you buy 35 February 100 call option contracts. Hendreeks stock is sellin

Question

Suppose you buy 35 February 100 call option contracts. Hendreeks stock is selling for $105.90 per share on the expiration date. How much is your options investment worth? What if the stock price is $101.80 on the expiration date? (Do not round intermediate calculations. Omit the "$" sign in your response.)

Calls Puts Strike   Close Price    Expiration Vol. Last     Vol. Last       Hendreeks     103      100     Feb       72    5.20     50 2.40          103      100     Mar       41 8.40     29 4.90          103      100     Apr       16 10.68     10 6.60         103      100     Jul       8 14.30     2 10.10     

Explanation / Answer

(a) Stock Price on expiration is 105.90

Value of Call Option on expiry = $105.90 - $100 = $5.90
Cost of purchasing call option = $5.20
Net pay-off on each call option contract = $5.90 - $5.20 = $0.70
Number of option contract purchase = 35
Total Call Option Pay-off = 35 * $0.70 = $24.50

(b) Stock Price on expiration is 101.80

Value of Call Option on expiry = $101.80 - $100 = $1.80
Cost of purchasing call option = $5.20
Net pay-off on each call option contract = $1.80 - $5.20 = -$3.40 (loss)
Number of option contract purchase = 35
Total Call Option Pay-off = 35 * -$3.40 = -$119.00 (loss)

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