Question

# Last week, you purchased eight Dropbox (DBX) call-option contracts with a strike price of \$30.50 at...

Last week, you purchased eight Dropbox (DBX) call-option contracts with a strike price of \$30.50 at a cost of \$3.75 per option.2 The option expires today when the value of DBX stock is \$37.54. Ignoring transaction costs and noting that one contract is for 100 options, what is your total net profit (or loss) on your investment?

Option Cost = Cost per option x no. of stocks in a contract x no. of contracts = \$3.75 x 100 x 8 = \$3000

Now, on expiry, you will exercise the call option as the strike price is lower than the market price and buy the stock @strike price of \$30.50 and then sell these shares on the market @\$37.54.

Purchase value = \$30.54 x 100 x 8 = \$24,400

Sale value = \$37.54 x 100 x 8 = \$30,032

Net profit = Sale value - Purchase value - Option Cost = \$30,032 - \$24,400 - \$3,000 = \$2,632

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