4. Speculating with stock options Suppose the following graph represents the stock price of Kaplin Incorporated throughout the four quarters in 2019. Suppose you purchased 3,000 shares at the beginning of January (the beginning of Quarter 1 ) at the market price. If you're a perfect market caller and sell the shares at their highest value prior to Quarter 2, your profit will be Now suppose you purchased American-style call options (at the beginning of Quarter 1) for $4 per share with an exercise price that option to purchase 3,000 shares, your profit will be . (Hint: If you exercise the call option, assume you immediately resell the shares at the highest price in Quarter 1.) Now suppose the stock price of Kaplin Incorporated throughout the four quarters in 2019 actually looks as follows: Kaplin Incorporated Stock Price (2019) Suppose you purchased 3,000 shares at the beginning of January (the beginning of Quarter 1) at the market price. If you decide that you made a mistake purchasing the stock and sell all of your shares once the price drops to $30, your profit will be Suppose you purchased American-style call options for $4 per share with an exercise price of $50 that expires at the end of price, you exercise the call option because it is you exercis When an investor thinks the price of a stock will decrease, purchasing call options will result in a higher profit (or lower loss) than purchasing the stock. When an investor thinks the price of a stock will decrease, purchasing call options will result in a lower profit (or greater loss) than purchasing the stock. When an investor thinks the price of a stock will increase, purchasing call options will result in a higher profit (or lower loss) than purchasing the stock. When an investor thinks the price of a stock will increase, purchasing call options will result in a lower profit (or greater loss) than purchasing the stock. Suppose you purchased 3,000 shares at the beginning of January (the beginning of Quarter 1 ) at the market price. If you decide that you made a mistake purchasing the stock and sell all of your shares once the price drops to $30, your profit will be purchasing the stock. When an investor thinks the price of a stock will decrease, purchasing call options will result in a lower profit (or greater loss) than purchasing the stock. When an investor thinks the price of a stock will increase, purchasing call options will result in a higher profit (or lower loss) than purchasing the stock. When an investor thinks the price of a stock will increase, purchasing call options will result in a lower profit (or greater loss) than purchasing the stock
