Suppose a stock is trading for $100/share, and you think the price has substantial upside within...

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Suppose a stock is trading for $100/share, and you think the price has substantial upside within the next two months. At-the-money calls are trading for $5/share. a. What would be your ROI if you decided to buy the shares outright, assuming the price increased to $120? b. What would be your ROI if you decided to buy the calls, assuming the price increased to $120? Suppose a stock is trading for $100/share, and you think the price has substantial upside within the next two months. At-the-money calls are trading for $5/share. a. What would be your ROI if you decided to buy the shares outright, assuming the price increased to $120? b. What would be your ROI if you decided to buy the calls, assuming the price increased to $120?

Answer rating: 100% (QA)

a If you decide to buy the shares outright your ROI Return on Investment would be calculated as foll... View the full answer