On April 1, 2022, the Bush Investment Traders Corporation purchased a call option for $175 on Worldwide Hotels, Inc., common shares. The call options gives Bush Investment Traders Corporation the option to buy 700 shares of Worldwide Hotels at an exercise/strike price of $27 per share any time during the next six months. The market price of Worldwide Hotels shares was $27 per share on April 1, 2022. On June 30, 2022, the fair value of the option was $10,000 which was incorporated in the books of Bush Investment Traders Corporation. On the following day when the market price for Worldwide Hotels stock was $38 per share, Bush Investment Traders Corporation exercised the option.

Determine Gain or Loss on the Derivatives which Bush Investment Traders would recognize on June 30, 2022.

Answer rating: 100% (QA)

Since this is a call option Bush Investment Traders Corporation has the right but not the obligati... View the full answer