Question

Shares of IBM are currently trading at $152.11. IBM call options with three weeks until expiration and a strike price of 155 are available with a premium of $2.98. Identify the answer that best describes the impact of selling the call option today. The answer choices discuss the impact per share (values would be 100 times larger for per contract)

Answer 1

Answer:

Receive $2.98 today .If the shares of IBM are above 155 at exportation,obligated to deliver shares at $155(sell). No further action if shares are below $155.

Explanation:

According to the given situation, the call option is sold i.e. there is an obligation to sell

And in case when price is high then the strike price, the buyer of call has right to buy at $155 that represents lesser price due to which there is an obligation to sell the shares at $155 .

Therefore the options would be exercised but it is against with your favor