The net profit on the investment is $270. This is calculated by subtracting the initial cost of the call options ($9.90) from the value of the options at expiration ($12.60). (option A)
To calculate the net profit or loss on the investment, you need to consider the cost of the call options and the value of the options at expiration.
1. Cost of Call Options:
- 6 contracts * $1.65/contract = $9.90
2. Value of Options at Expiration:
- The strike price of the options is $32.50, and the current stock price is $34.60.
- The intrinsic value per option = Current stock price - Strike price
- Intrinsic value = $34.60 - $32.50 = $2.10
- Total value of 6 options = 6 contracts * $2.10/contract = $12.60
3. Net Profit or Loss:
- Net Profit or Loss = Value at expiration - Cost of options
- Net Profit or Loss = $12.60 - $9.90 = $2.70
The correct answer is A. $270.