Question

You purchased eight TJH call option contracts with a strike price of $37.50 when the option quote was $.55. The option expires today when the value of TJH stock is $37.10. Ignoring trading costs and taxes, what is your total profit on your investment

Answer 1

-$4.40

Step-by-step explanation:

Buyer of Call payoff = Max(S-K,0)

Buyer of Call payoff = Max(37.1-37.5,0)

Buyer of Call payoff = $0

Buyer of Call profit = Call payoff-premium

Buyer of Call profit = 0 - 0.55

Buyer of Call profit = -$0.55

So, for 8 options, Loss = 8*-$0.55 = -$4.40

So therefore, the total profit/loss on eight call option is -$4.40