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You purchase one ABC Inc. July 125 call contract for a premium of $5. You hold...

You purchase one ABC Inc. July 125 call contract for a premium of $5. You hold the option until the expiration date, when ABC Inc. stock sells for $123 per share. How much will you realize on the investment?

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Answer #1

I will be purchasing the call of $125 and paying the premium of $5. I will only which realising the profits when the share price will be moving up at the time of the expiration than the strike price of the call.

In this case the option will not be exercisable since current market price is lower than the exercise price.

the option will be lapsing and I will be losing on to my investment for the entire amount of premium paid.

Let's assume that total units in a call option will be 100.

I will be losing =[$5*100]= $500 loss.

My entire loss would be $500

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