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4. Luukas purchased 10 call option contracts through his broker. The option price is $2.00. The strike price is $150 and the current share price
4. Luukas purchased 10 call option contracts through his broker. The option price is $2.00. The strike price is $150 and the current share price is $125.66. The options expire in about 5 months. a. Using the commission schedule provided in the chapter, what commission does he owe on the purchase of the options? b. Assume the stock price eventually increases to $160 and is exercised at that price, what is Luukas' commission on the exercise of the option? c. It will cost Luukas 0.50% to sell the underlying stock, what is his next profit? d. Assume that when the underlying stock price increased, so did the value of the call option contracts. The call option contract price rose to $57.50. What would be the profit to Luukas if he sold the options instead of exercising them? Sample Commission Schedule Dollar Amount of Trade Commission* $10,000 $120+ 0.25% of dollar amount *Maximum commission is $30 per contract for the first five contracts plus $20 per contract for each additional contract. Minimum commission is $30 per contract for the first contract plus $2 per contract for each additional contract
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