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Suppose company XYZ's stock is trading at $58.24. You currently hold a call option with a...

Suppose company XYZ's stock is trading at $58.24. You currently hold a call option with a strike price of $60.08 and premium on the option was $14.79. If today is the expiration date, how much did you gain or lose on the option?

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Answer #1

Call option gives the holder of option right to purchase a share at pre-determined fixed price irrespective of what the current price of share in market is. To hold this right he pays a premium upfront .A rational investor will purchase a share only if the current price of share in market is well above his contracted price.

In current case the price of share is 58.24 and his option price is 60.08. Most definitely he wont buy this and the premium paid would be his loss.

So loss on this is $14.79

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