Question

You want to bury a call option on NIO stock. The option premium is $2.34. The Exercise price is $156.12, The stock price at the time of expicy was $161.31. What was the net profit per share of NiO stock?

Answer 1

The net profit from exercising the NIO stock call option is $285 for one contract, which amounts to $2.85 per share after subtracting the $234 paid for the option premium from the total intrinsic value of $519.

Step-by-step explanation:

To calculate the net profit from exercising a call option, we can follow these steps:

1. Determine the intrinsic value of the option at expiration. This is the difference between the stock's price at expiration and the exercise price of the option, as long as the stock's price is above the exercise price.
2. Subtract the cost of the premium paid for the option from the intrinsic value to determine the net profit (or loss) from the option trade.

In our case, the stock price at the time of expiration is $161.31 and the exercise price of the option is $156.12. The intrinsic value of the option is therefore $161.31 - $156.12 = $5.19 per share. As one option contract typically covers 100 shares, the total intrinsic value for one contract is $5.19 * 100 = $519.

The premium paid for the option was $2.34 per share, which for one contract equates to $2.34 * 100 = $234. Therefore, the net profit is $519 - $234 = $285 for one contract, or $2.85 per share.