1.Suppose a trader buys 1,000 shares of BP (BP) at $44 per share and simultaneously writes 10 call options (one contract for every 100 shares) with a strike price of $46 expiring in one month, at a cost of $0.25 per share, or $25 per contract and $250 total for the 10 contracts. 

a.Show through calculations whether the contract will be exercised or not if the Market value of share falls to $40.

b.If the share price rises to $48 before expiration.

c. If the share price is $45?

Answer rating: 100% (QA)

Total investment 44100025044250 Now the price fall to 40 The loss will be 2504250 So if exercise ... View the full answer