In each of the scenarios below, answer the following questions: Should you exercise your option? Would...

 

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In each of the scenarios below, answer the following questions: Should you exercise your option? Would it have been better to make a direct investment in the stock? Please phrase your answers in terms of percentage of gain/loss so that number of shares purchased is irrelevant. (a) Suppose, on February 4, 2022, a European Call option on Uber Technologies, Inc. (UBER) stock costs $3 with a strike price of $41. The current price of the share is $40. (i) The stock price on the exercise date increases by 5%. (ii) The stock price on the exercise date increases by 1%. (iii) The stock price on the exercise date decreases by 1%. In each of the scenarios below, answer the following questions: Should you exercise your option? Would it have been better to make a direct investment in the stock? Please phrase your answers in terms of percentage of gain/loss so that number of shares purchased is irrelevant. (a) Suppose, on February 4, 2022, a European Call option on Uber Technologies, Inc. (UBER) stock costs $3 with a strike price of $41. The current price of the share is $40. (i) The stock price on the exercise date increases by 5%. (ii) The stock price on the exercise date increases by 1%. (iii) The stock price on the exercise date decreases by 1%.

Answer rating: 100% (QA)

i Exercising the option would be lucrative in this circumstance The new stock price is 42 40 105 whi... View the full answer