Question
can someone explain? The stock price of Lotus is currently $220 and the call option with strike price of $220 is $10. A trader purchases
can someone explain?
The stock price of Lotus is currently $220 and the call option with strike price of $220 is $10. A trader purchases 100 shares of Lotus stock and short 1 contract of call options with strike price of $220. As a financial analyst at Citibank, you want to answers the following two questions: a. What is the maximum potential loss for the trader? b. When the stock price is $240 and the call is exercised, what is the traders net profit?
| 1. | When the stock price is $240 and the call is exercised, the traders net profit is $1000 | |
| 2. | The maximum potential loss for the trader is $23000 | |
| 3. | The maximum potential loss for the trader is $20,000 | |
| 4. | When the stock price is $240 and the call is exercised, the traders net profit is $1300 | |
| 5. | The maximum potential loss for the trader is $22000 | |
| 6. | When the stock price is $240 and the call is exercised, the traders net profit is $1200 | |
| 7. | The maximum potential loss for the trader is $21000 | |
| 8. | When the stock price is $240 and the call is exercised, the traders net profit is $1100 |
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Intermediate Accounting
Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,
10th Canadian Edition, Volume 1
978-0176509736
