You purchase 11 call option contracts with a strike price of $55 and a premium o

Question

You purchase 11 call option contracts with a strike price of $55 and a premium of $4.50. Assume the stock price at expiration is $67.89.

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

What if the stock price is $53.84? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Omit the "$" 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)

Strike price is lower than market price. Option will be exercised.

Profit = ($67.89-$55-$4.50)×11 = $92.29

2)

Strike price is higher than market price. Option will not be exercised.

Loss = $4.50×11 = $49.50

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