Question

You buy 300 shares of ABC stock at $53 per share. At the same time, you write 300 call options on ABC stock with exercise price equal to $51 and call premium $6.92. Calculate your profit if ABC stock price at the expiration of the option is $48.06 per share.

	A.	$594
	B.	-$594
	C.	-$1,482
	D.	$1,482
	E.	$692

You buy 320 call options with exercise price of $72 and call premium of $6.50. You write 640 call options with exercise price of $75 and call premium of $4.10. You also buy 320 call options with exercise price of $78 and call premium of $2.90. All the options have the same underlying asset and expire on the same date. Calculate the profit of your strategy if the stock price at expiration is equal to $76.70.

	A.	$40
	B.	$44
	C.	$36
	D.	$32

Answer 1

Premium received	$ 2,076.00	(300*6.92)
Loss on stock	$ 1,482.00	(53-48.06)*300
Profit	$     594.00

Hence option A is correct

	Per option	Total
Profit 320 call 72	$        -1.80	$   -576.00
Profit 640 call 75	$          2.40	$ 1,536.00
Profit 78 call	$        -2.90	$   -928.00
		$       32.00

Hence option D is correct