Question
A typical stock option contract is on 100 shares of stock. Suppose that you purchased a single call option contract with a strike price of
A typical stock option contract is on 100 shares of stock. Suppose that you purchased a single call option contract with a strike price of $100 on Chevron Corporation common stock (CVX). If the option premium was $5.00 at the time of purchase and the current price of CVX is $120 per share, what will the profit from your investment be if you exercise your options?
Part 2 - Suppose that instead of purchasing the options, you purchase the equivalent dollar amount of CVX shares at $100 per share. Assuming you sell these shares at $130 per share, How much greater will your return be if you purchased the options instead of the shares? Answer in percent without the percent sign.
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