Options vs stock investments You believe that stock will increase in value from its current level, assumed to be $90 However, share price could also fall. 6 mo maturity call w/ exercise of $90 sells for $10 Semi annual interest rate is 2% M total amount of spending money = $9,000 a Purchase 100 shares at $90 b Purchase 900 call options at price of $10 each c purchase 100 calls plus invest $8,000 in 6 mth bills at 2% CONCER Portfolio value @expiration 85 100 shares A stock 900 call $ 90 stock price- 95 mu 100 105 ---1 110 8,500 $ 9,000 $9,500 $10,000 $ 10,500 $ 11,000

Options vs stock investments You believe that stock will increase in value from its current level, assumed to be $90 However, share price could also fall. 6 mo maturity call w/ exercise of $90 sells for $10 Semi annual interest rate is 2% total amount of spending money =$9.000 a Purchase 100 shares at $90 b Purchase 900 call options at price of $10 each c purchase 100 calls plus invest $8,000 in 6 mth bills at 2%