Bla. Illustration case:

On Janary $2,$ Year $7,$ Bob the Builder purchases $10$ call eption contracts from Scoop by paying $$400.$ The option gives Bob the right to purchase $1,000$ shares of Apple at $$100$ per share, expiring on April $30,$ Year $7.[$Note: typically, one opeion contrast is written on $100$ shares of the underlying.$]$ The share price of Apple on January $2,$ Year $7,$ is exactly $$100,$ and the option premium is $$40$ per contract. This option is an American$-$style option requiring physical settlement.

Intrinsic value of one call option contract $-($$$100-$$$100)**100=50$

Time value of one call eption contract $-$$$40$

Joumal entry on January $2.$ Year $?$

${?}^{Dt})$ Derivatives $-$ Financial assets

Cr$)$ Cash

$400$

$400$

As of March $31,$ Year $7.$ Bob's fiscal ycar$-$end, the share price of Apple is $$105,$ and the opeion contract is now traded at $$505$ per coetract.

Intrinsic value of one call eption contract $-$

Time value of ene call eption contract $=$

Joural entry on March $31.$ Year $?$

If Bob had purchased $4$ shares of Apple using $$400$ on January $1,$ Year $7,$ what would be his gain?

If shares of Apple were traded at $599$ on March $31,$ Year $7,$ how much loss would Bob recognize, assaming the time value of the option remains unchanged?

In a case where Bob purchased $10$ option contracts:

In a case where Bob purchased $4$ shares of apple: