Question: You bought two stock call option contracts with the strike price of $54.7. The option premium per contract was $3.5 and the spot price was

You bought two stock call option contracts with the strike price of $54.7. The option premium per contract was $3.5 and the spot price was $56 when you entered into the option contracts. The contract size per contract is 100. Now the spot price increased to $57.0 and the call option price increased to $4.65. Upon these price changes, you decided to exercise the options.

Compute the rate of return on the options.

( Remember ROR = $NetProfit/$Cost )

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

To calculate the rate of return on the options we first need to determine the net profit and the cos... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

*Exercise 3-05 A tabular analysis of the transactions made during August 2022 by Wolfe Company during its first month of operations is shown below. Each increase and decrease in stockholders' equity...

KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...

Given 2x "+16x+40x=0 x=5, vo=4 (IVP-I) [1](a) Find the solution of IVP-I. Show all work to justify your answers. [1](b) Circle all appropriate terms describing IVP-II, justify each of your...

You work for Leonard & Hofstadter, a financial intermediary. The company has written to various clients a total of 12,000 European 5-month call options and 7,000 European 8-month put options on...

10719 17 439 The current spot price of an underlying asset is $300. You buy a stock call option contract with the strike price of $285. The option premium per contract is $30. Compute the time value...

the current spot price of an underlying asset is 300. you buy a stock call option contract with the strike price of 285. the option premium per contract is 30. Compute the time value of one option a....

Question 1 You purchased four call option contracts with a strike price of $25.00 and a premium of $1.25. At expiration, the stock was selling for $26.80 a share. What is the total profit or loss on...

16. You bought twelve call option contracts with a strike price of $27.50 and a premium of S0.77. At expiration, the stock was selling for $29.90 a share. What is the total profit or loss on your...

Suppose that we wish to keep track of a point of maximum overlap in a set of intervalsa point that has the largest number of intervals in the database overlapping it. a. Show that there will always...

The switched interconnect increases the performance of a snooping cache-coherent multiprocessor by allowing multiple requests to be overlapped. Because the controllers and the networks are pipelined,...

format using 50 to 100 words;5. What steps should be completed, regarding a background check for a potential employee, prior to hiring that person? As it relates to background checks, is there a...

On 1 July 2018 Lincoln Ltd issues $2 million in six-year debentures that pay interest each six months at a coupon rate of 8 per cent. At the time of issuing the securities, the market requires a rate...

Under the terms of an interest rate swap, PDX Corp has agreed to receive 12% per annum and to pay six-month LIBOR in return on a notional principal of $190 million with payments being exchanged every...

Consider a tank of constant volume V and containing at time t an amount Q(t) of pollutant, evenly distributed throughout the lake with a concentration c(t), where c(t)-Q(t)/V. Assume that water...

1. Cleopatra Ltd offers $400 million of debentures, which is payable on application. The Interest rate on debentures is 8.5% per annum, payable annually. By 15 March 2020, application is received for...

A general partner has personal liability to creditors beyond the scope of his/her investment in the partnership.Select one:TrueFalse

Margaret OFlaherty, a portfolio manager for MCF Investments, is considering investing in Alpine Chemical 7% bonds, which mature in 10 years. She asks you to analyze the company to determine the...

Ricky Corporation had the following alphabetical account balance listing at December 31, 20X1 (in thousands of dollars). Required: Prepare a balance sheet for Ricky Corporation at December 31, 20X1....

Neighborhood Supermarkets is preparing to go public, and you are asked to assist the firm by preparing its statement of cash flows for 20X1. Neighborhoods balance sheets at December 31, 20X0, and...

What are some of the advantages in the use of AOA notation as opposed to AON? Under what circumstances does it seem better to apply AON methodology in network development?

What is the time estimate of an activity in which the optimistic time is 5 days, the likely time is 8 days, and the pessimistic time is 14 days? Show your work.

Give examples of circumstances in which a project would employ lag relationships between activities using: a. Finish to start b. Finish to finish c. Start to start d. Start to finish