29. (a). You purchased eight WAN call option contracts with a strike price of $2

Question

29. (a). You purchased eight WAN call option contracts with a strike price of $27.50 when the option was quoted at $0.60. The option expires today when the value of WAN stock is $28.20. Ignoring trading costs and taxes, what is your net profit or loss on your investment? (b) You wrote (i.e., sold) one call option contract with a strike price of $42.50 when the option was quoted at $1.10. The option expires today when the value of the underlying stock is $38.10 Ignoring trading costs and taxes, what is your net profit or loss on your investment?

Explanation / Answer

29(a) Purchase of an option Strike Price 27.5 Expires at 28.2 option price 0.6 Profit=(option expiring price-(option strike price+ Option price) =(28.2-(27.5+.6)) 0.1 29(b) Sales of an option Strike Price 42.5 Expires at 38.1 option price 1.1 Profit=((option strike price- Option price)-option expiring price) =((42.5-1.1)-38.1) 3.3

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.