Author Question: You have $10,000 to invest and you are considering buying 100 shares of Oceanic Airlines or 10 call ... (Read 236 times)

azncindy619 · **on:** Apr 25, 2021

Question 1

You are long a put option with a strike price of $100. The option expires today and the underlying security is trading at $94. If you purchased the option for $8, should you exercise the option?
◦ Yes
◦ No

Question 2

You have $10,000 to invest and you are considering buying 100 shares of Oceanic Airlines or 10 call options on the shares. The call option expires in six months, has a strike price of $100 and has a premium of $10 (per share). The stock price is currently $100. Assume that the stock price rises to $125 by the option expiry date. What is the ratio of the rate of return on the calls over the return on the stock?
◦ 1.0
◦ 2.0
◦ 4.0
◦ 6.0

juwms · **Reply #1 on:** Apr 25, 2021

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