Question

Suppose you purchase twelve call contracts on Macron Technology stock. The strike price is $65, and the premium is $2.30. If, at expiration, the stock is selling for $71 per share, what are your call options worth? What is your net profit? (Omit the "$" sign in your response.)

Answer 1

Answer:

Call option worth = 6

Net profit = 3.7

Explanation:

Call option worth and net profit can be calculated as follows

DATA

Strike price = 65

Premium = 2.30

Selling price = 71

Call option worth =?

Net profit =?

Requirement A: Call option worth

Solution

Call option worth = Selling price - strike price

Call option worth = 71 - 65

Caall option worth = 6

Requirement B Net profit

Solution

Net profit = Selling price - (Strike price + Premium)

Net profit = 71 - (65 + 2.3)

Net profit = 71 -67.3

Net profit = 3.7

Answer 2

Answer:

Call option worth = $6

Net Profit = $3.70

Explanation:

The strike price of the option is $65

The amount of premium = $2.30

The selling price = $71

Call option worth = Current Price - Strike price

Call option worth = $71 - $65

Call option worth = $6

Net Profit = Selling Price - (Strike price + Premium)

Net Profit = $71 - ($65 + $2.30)

Net Profit = $71 - $67.30

Net Profit = $3.70