You purchase 19 call option contracts with a strike price of $105 and a premium

Question

You purchase 19 call option contracts with a strike price of $105 and a premium of $1.75. Assume the stock price at expiration is $115.12.

What if the stock price is $101.07? (Negative amounts should be indicated by a minus sign. Omit the "$" sign in your response.)

If you wanted to purchase the right to sell 4,200 shares of JC Penney stock in May 2010 at a strike price of $20 per share, how much would this cost you? (Omit the "$" sign in your response.)

$   

You purchase 19 call option contracts with a strike price of $105 and a premium of $1.75. Assume the stock price at expiration is $115.12.

Explanation / Answer

Ans 1 - The dollar profit will be 115.12 - 106.75 = $8.37 per share & Total profit = 8.37 x 19 = $159.03

Ans 2 - If the stock price is below the strike price then the option will not be exercised and the contract purchase value will be lost = 1.75 x 19 = $33.25

Ans 3 - The premium at strike price of $20 per share is $0.75. Hence the cost would be 0.75 x 4200 = $3150

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