The prospect of tourism sector is not so good during this COVID-19 pandemic period. Tasha believe that the share price of tourism related companies will fall as a result of lower earnings. One of the companies that involve in this sector is Sunshine Company. Tasha have decided invest in options contract in order to reduce her investment risk. The following types of put and call options with various premium and strike price were available for her to invest. Sunshine Company.

Calculate the expected profit to be earned for each option if the future share price of Sunshine Bhd goes down to RM 21 per share in six months.

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Sunshine Berhad. Current share price = RM23 per share (as at 1st June 2020) Call Options Put Options Strike Price Expiration | Premium RM20 Dec 2020 RM0.25 RM24 Dec 2020 RM0.25 Strike Price RM20 RM24 Expiration | Premium Dec 2020 RM1.50 Dec 2020 RM1.30 Sunshine Berhad. Current share price = RM23 per share (as at 1st June 2020) Call Options Put Options Strike Price Expiration | Premium RM20 Dec 2020 RM0.25 RM24 Dec 2020 RM0.25 Strike Price RM20 RM24 Expiration | Premium Dec 2020 RM1.50 Dec 2020 RM1.30

Answer rating: 100% (QA)

To calculate the expected profit for each option we need to compare the future share price of Sunshine Bhd with the strike price of the options and ta... View the full answer