Question
An investor is planning to purchase 500 shares of ABC stock in one month. The stock is currently trading at 167.09. Call options with strike
An investor is planning to purchase 500 shares of ABC stock in one month. The stock is currently trading at 167.09. Call options with strike price $184 are available with premium $9.71. Expiration of the option matches the exact point in time at which the investor will purchase the 500 shares. The investor hedges the anticipated stock purchase by purchasing five call option contracts covering 500 shares today. What is the investor's total cashflow associated with purchasing the 500 shares and the call option hedge if the stock price is 185.77?
Record your answer as the cashflow for the investor with a positive value representing cash inflow and a negative value representing cash outflow. The cashflow value you record as your answer should include the total value from the option contract and the purchase of the shares.
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