Question

Suppose you are short 50 contracts on a 2-year 50-call option on TSLA. How much will your option position increase in value if TSLA stock price goes up by $3 (use negative number if value decreases).

Answer 1

Solution:

Call Excercise Price : $50, Time : 2 Year, 50 Contract short (Call Write)

Increase in option position, when stock price goes up by $3 = Total Contracts * Increase in one call option

Increase in option position, when stock price goes up by $3 = 50 * ($50 - $53)

Increase in option position, when stock price goes up by $3 = 50 * $ -3

Increase in option position, when stock price goes up by $3 = $ -150

Or we can say that the position will decrease by $150