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27 November, 01:50

You purchased six TJH call option contracts with a strike price of $40 when the option was quoted at $1.30. The option expires today when the value of TJH stock is $41.90. Ignoring trading costs and taxes, what is your total profit or loss on your investm

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  1. 27 November, 02:00
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    Profit = $0.60

    Explanation:

    Call option is an option to buy by paying a call premium. The option is exercised when current market price is more than the strike price. In this case, the strike price is $40 and the premium is $1.30, whereas the current market price is $41.90. The option buyer can exercise the contract by purchase the stock at lower price and sell at current market price to gain return. The gain will be calculated as:

    Value = Current Price - Strike Price

    Value = 41.90 - 40

    Value = 1.90

    To calculate the profit, we needs to subtract premium cost from value:

    Profit = Value - Call Premium

    Profit = 1.90 - 1.30

    Profit = $0.60
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Home » Business » You purchased six TJH call option contracts with a strike price of $40 when the option was quoted at $1.30. The option expires today when the value of TJH stock is $41.90.
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