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A call option on MassComputer Corp. is trading with a strike price of $100 and an expiration date on November 18th at 4 pm in the afternoon. The premium paid on the call is $7.55. What is the net profit or loss from buying the call just prior to 4 pm on November 18 if at this time the stock price per share of MassComputer is:

Respuesta :

The net profit or loss from buying the call should be $3.17 and -$7.55.

Calculation of stock price per share:

here, a Stock price higher than the strike price option will be exercised.

Net profit = Stock price - Strike price - Option premium

= $110.72 - $100 - $7.55

Net profit = $3.17

Stock price is lower than the strike price option will fail.

Net profit = Stock price - Strike price - Option premium

= 0 - $7.55

Net profit(loss) = -$7.55

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