Asked by Krupa Patel on Jun 22, 2024
Verified
You purchase one MBI July 125 call contract (equaling 100 shares) for a premium of $5. You hold the option until the expiration date, when MBI stock sells for $123 per share. You will realize a ________ on the investment.
A) $200 profit
B) $200 loss
C) $500 profit
D) $500 loss
Call Contract
An options contract that gives the holder the right to buy an underlying asset at a specified price within a certain time frame.
Premium
The amount by which the price of a security, especially a bond or insurance policy, exceeds its principal amount or face value.
- Learn about the payoff and profit implications for individuals buying and selling call and put options in various market situations.
Verified Answer
DD
Danji DavidJun 27, 2024
Final Answer :
D
Explanation :
Long call profit = Max [0, ($123 − $125)(100)] − $500 = −$500
Learning Objectives
- Learn about the payoff and profit implications for individuals buying and selling call and put options in various market situations.