In early April, an investor expects the stock market to rise strongly over the next two to
Question:
In early April, an investor expects the stock market to rise strongly over the next two to three months. This investor decides to purchase an S&P 100 index May 590 call, currently selling for 24, on a day when the S&P 100 index closed at 588.5.
Assume that the market rises, as the investor expects, to a mid‐May level of 623.81 (a 6 percent increase). The investor could exercise the option and receive a cash settlement equal to the difference between the index close (623.81) and the exercise price of 590, multiplied by $100, or
Transcribed Image Text:
623.81 S&P 100 Index close -590.00 S&P 100 Call exercise price = 33.81 x $100 = $3,381
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Take the index close price 6238162381 Subtract the cal...View the full answer
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Related Book For
Investments Analysis And Management
ISBN: 9781118975589
13th Edition
Authors: Charles P. Jones, Gerald R. Jensen
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