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On March 1, 2023, Antony Ltd. purchased a call option on the TMX Montreal Exchange, a subsidiary of TMX that specializes in derivative products. The
On March 1, 2023, Antony Ltd. purchased a call option on the TMX Montreal Exchange, a subsidiary of TMX that specializes in derivative products. The option gave Antony the right to buy 1,000 shares in Constantine Ltd., at a price of $100 per share. The option had an expiry date of May 30, 2023. On the day Antony purchased the option, Constantine shares were trading at $100 each. Antony paid $2,000 for the options. When Antony Ltd. prepared its monthly financial statements on March 31, 2023, the Constantine shares were trading at $112 each, and the options for Constantine shares were trading at $13,333. On April 1, Antony exercised the options. Constantine shares were still trading at $112 and the options value was unchanged from March 31. Instructions a) Prepare the journal entries to record the transactions described above. b) Calculate the intrinsic and time value of the option on March 31, 2023 c) Is there anything different Antony could have done on April 1 to increase the profitability of the transactions described above? Explain why or why not
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