Question

you wrote eight call option contracts with a strike price of $37.50 at a call price of $1.10 per share. what is your net profit or loss on this investment if the price of the underlying stock is $40.30 per share on the option expiration date?

Answer 1

The net loss  -$ 1306 on the investment if price underlying stock is $40.30 per share

Evaluating the profit or loss :

• Since I wrote the call option, if the call option buyer wants to buy the stock from me, I am obligated to sell the stock.

• The exercise price is $37.50 and the underlying share price is $40.30 per share.

Since the brand price is higher than the strike price, a buyer can definitely come to buy stock from me at the strike price ($37.50) and profit by selling it at the market price ($40.30) in the market where it was sold. .

• In this case, if you decide not to sell to the buyer, you must pay the call option buyer the difference between (market price and strike price).

• However, as the option seller, I receive a call price of $1.1 from the option buyer.

Therefore, the net loss from this trade is $13.6. See below for calculations.

                Strike Price                                                                37.50

                 Market Price                                                                40.30

       Difference (Loss Per Contract)                                             -2.80

Total Loss (Difference in

(Market Price &  Strike Price)*  Total No of Contract)…

i.e. (2.80×8)                                                                                    -22.40

Call Price to be Received by Me

(Call Price per contract * No of Contract Wrote)…

i.e. (1.1×8)                                                                                               8.8

Net Loss                                                                                                  -13.60

Learn more about price of shares  :

brainly.com/question/25818989

#SPJ1