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QUESTION 1 Currently the shares of Layuna Bhd are selling for RM25 per share and it is an American style option. The call option expiring
QUESTION 1 Currently the shares of Layuna Bhd are selling for RM25 per share and it is an American style option. The call option expiring in 8 months is being sold at the premium of RM3 per share. The strike price of the option is RM27. Two months before maturity, the market price of Layuna's decline to RM20. Adam writing for 1000 shares of Layuna's shares to Julia. Assume this is a naked call. Required: a. Identify the type of the above option. Justify your answers. Calculate the profit or loss when the market price decline to RM20 per share for 1000 shares. Is the option In-the-Money (ITM), At-The-Money (ATM) or Out-of-The-Money (OTM)? Explain. d. Why the option can be exercised before maturity? Explain the style of trading in options
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