Last month when IBM was selling for $86, Dan purchased a call option on IBM with an exercise price of $90 for $2 per option or $200 total. Yesterday IBM closed at $95. Based on the minimum value of the contract, if Dan sells his call at yesterday's close, what would his return be?

Emily wrote an uncovered call option with an exercise price of $40 and received $300 for the contract. When the price of the stock reached $55, the call option holder decided to exercise the call. Ignoring commissions and taxes, what would Emily's dollar return on this investment be?

Caroline pays 15% taxes on dividends and capital gains and 35% taxes on ordinary income. Three years ago, she purchased 100 shares of XYZ, Inc. for $70. In January, Caroline wrote a six month put option on the stock at an exercise price of $90 and received $500. Three days after the purchase, the price of XYZ dropped significantly and has not been above $80 since. The result is that the put buyer chose not to exercise her put. Ignoring commissions, Caroline's tax on this transaction is?

Henry pays 15% taxes on dividends and capital gains and 35% taxes on ordinary income. Five years ago, Henry purchased 100 shares of ABC, Inc. for $42 a share. Three months ago, Henry wrote a call option on the shares with an exercise price of $55 a share and received $1,000 for the contract. Yesterday, when the market price of the stock was $70, the call buyer exercised his option to purchase the shares from Henry. Ignoring commissions, what would Henry's taxes on this transaction be?

Answer rating: 100% (QA)

To calculate Dans return we need to first determine the profit he would make if he exercised the option and then subtract the cost of the option Since ... View the full answer