Question
Duke B. Deville sees that WIN stock is trading at $90 per share. Duke writes (sells) a naked call on WIN with a strike price
Duke B. Deville sees that WIN stock is trading at $90 per share. Duke writes (sells) a naked call on WIN with a strike price of $92.00. Duke collects a premium of $0.85 on the transaction. WIN's stock price goes up to $110 per share by the expiration date of the option. Calculate Duke's total gains/losses from this transaction:
Duke gains $2,000.00 on the transaction
Duke gains $2,085.00 on the transaction
Duke loses $2,000.00 on the transaction
Duke loses $2,085.00 on the transaction
Duke loses $1,715.00 on the transaction
Question 281 pts
Ken T. Ucky believes that WIN will see a dramatic increase in stock price in the near term. WIN is currently trading at $38 per share. Ken believes that WIN will go as high as $40 per share. Ken buys a call option on WIN with a strike price of $38.00. The premium Ken pays is $1.00. At expiration, WIN has not increased it's share price (it turns out, WIN's stock was fundamentally flawed, relying too much on the company's interior strength combined with a little flash and sizzle...their competitors, meanwhile, gained ground by being good overall companies and by focusing on both external and internal things that really mattered). WIN is still sitting at a price of $38.00. The option expires worthless. Instead of making a lot of money and enjoying his 'one shining moment,' how much money does Ken lose on this bitter, bitter, unforeseeable, painful, and totally unforgettable transaction?
$1.00
$100.00
$200.00
$3,800 and a place in history
$4,000 and immortalization in the 'hall of fame'
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