Question
Amazon.com, Inc. has a current stock price of $3500.00, and December 18 American call options with a strike price of $3490 currently sell for $350.00
Amazon.com, Inc. has a current stock price of $3500.00, and December 18 American call options with a strike price of $3490 currently sell for $350.00 (per share). A major investor who feels that the price of the stock will increase is trying to decide between buying 1000 shares and going long 10,000 call options (which is 100 option contracts, each on 100 shares). Both strategies involve an investment of $3.5M. Ignoring the early exercise option, under what circumstances will each approach be better at December 18? What is the break-even stock price on December 18 between the strategies?
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