Question

Apple is trading at $250 a share, and you want to buy 1 June call option with a strike price of $250. What is your profit if Apple closes at $275 in June’s end, if the option costs $10. What is the profit if Apple closes at $245, and $260

Answer 1

bought a June call option with a strike price of $250

call price C = $10

Strike price X = $250

at expiration Spot price S0 = $275

So, profit = (S0 - X - C)*contract multiplier = (275 - 250 - 10)*100 = $1500

at expiration, spot price = $245.

So this call will not be exercised as spot price is less than strike price

So, profit = -C*contract multiplier = -10*100 = -$1000

at expiration Spot price S0 = $260

So, profit = (S0 - X - C)*contract multiplier = (260 - 250 - 10)*100 = $0