Problem 3-7 You purchase 21 call option contracts with a strike price of $115 an
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Question
Problem 3-7
You purchase 21 call option contracts with a strike price of $115 and a premium of $4.40. Assume the stock price at expiration is $122.46.
What is your dollar profit? (Do not round intermediate calculations. Omit the "$" sign in your response.)
What if the stock price is $108.41? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Omit the "$" sign in your response.)
You purchase 21 call option contracts with a strike price of $115 and a premium of $4.40. Assume the stock price at expiration is $122.46.
Explanation / Answer
1. Strike Price = $ 115.00
Premium = $ 4.40
Total Put Price = $ 119.40
Call Price on expiration = $ 122.46
Dollar Profit = $ 122.46 - $ 119.40 = $ 3.06 per call option contract
Total Dollar Profit = 21 X $ 3.06 = $ 64.26.
2. If the stock price on expiration is $ 108.41
There is a Dollar Loss of $ 108.41 - $ 119.40 = $ 9.99
The total Dollar Loss is 21 X $ 9.99 = $ 209.79
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