you purchase one mbi july 140 call contract (equaling 100 shares) for a premium of $19. you hold the option until the expiration date, when mbi stock sells for $153 per share. you will realize a on the investment.
$600 profit
$600 loss
$1,300 profit
$1,300 loss

Question

06-12-2022
Business

Answered

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you purchase one mbi july 140 call contract (equaling 100 shares) for a premium of $19. you hold the option until the expiration date, when mbi stock sells for $153 per share. you will realize a on the investment.
$600 profit
$600 loss
$1,300 profit
$1,300 loss

Sagot :

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SonaDas SonaDas · Answer 1 · 2022-12-10T09:07:47-05:00

Hence you will realize a loss of $600 on the investment.

Define call option.

A call option is a contract that exists between a buyer and a seller of a call option to swap securities held at a specific price within a specific timeframe. When the difference between the stock price and the strike price at expiration is less than the premium paid, the call's owner makes a profit. If the underlying stock continues to trade below the strike price, the writer of a call option will benefit.

To calculate the profit realized on the investment

Given:

Profit from call option= (153- 140) × 100

Profit from call option= $1,300

Profit from premium= 19 × 100

Profit from premium= $1,900

Profit on investment= Profit from call option - Profit from premium

Profit on investment = 1,300 - 1,900 = -$600

So there is a loss of $600

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Sagot :

Define call option.

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