Question

ou purchase one MBI July 127 call contract (equaling 100 shares) for a premium of $17. You hold the option until the expiration date, when MBI stock sells for $137 per share. You will realize a ______ on the investment.

Answer 1

Answer:

$700 profit

Explanation:

Exercise Price = $127

Expiration date price = $137

Profit for Calls buyer = $137 - $127 = $10

1 Call = 100 shares. So, the total profit = $10*100 = $1000

Buying price of one option = $17

Total buying price of the call option = $17*100 = $1,700

Total loss for the buyer = $1,700 - $1,000

Total loss for the buyer = $700

Note: Loss for the buyer = Profit for the seller. So, i will realize a $700 profit on the investment.