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You buy a call option on SFr with a strike price of $0.6573/SFr. You pay a premium

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You buy a call option on SFr with a strike price of $0.6573/SFr. You pay a premium of $0.0010/SFr to buy the option. The contract size is SFr125, 000. If the option expires when the spot price is $0.6682/SFr, what is your net profit on this transaction? (For simplicity, ignore the time value of money.)
Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.
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The option is worth 06682...View the full answer


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A call option is a type of financial contract that gives the holder the right, but not the obligation, to buy an underlying asset (such as a stock, commodity, or currency) at a specified price (called the strike price) within a specified period of time. When an investor purchases a call option, they are essentially betting that the price of the underlying asset will rise above the strike price before the option\'s expiration date. If the price of the asset does rise above the strike price, the investor can exercise the option by buying the asset at the strike price and then selling it at the higher market price, thereby earning a profit. Call options are often used as a speculative investment strategy, as they allow investors to potentially profit from the upward movement of an asset without having to actually own the asset itself. They are also commonly used as a hedging tool to protect against potential losses in a portfolio.

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