Final answer:
To calculate the profit or loss on a call option trade, we need to consider the initial cost of the options and the difference between the stock price at expiration and the exercise price of the call. You bought 5 call option contracts at a price of $3.50 per contract, resulting in a total initial cost of $17.50. The stock price at expiration is $52.00, which is higher than the exercise price of $50.00. Therefore, the profit on this trade is -$5.00, resulting in a loss.
Step-by-step explanation:
To calculate the profit or loss on a call option trade, we need to consider the initial cost of the options and the difference between the stock price at expiration and the exercise price of the call. In this scenario, you bought 5 call option contracts at a price of $3.50 per contract, resulting in a total initial cost of $17.50. The stock price at expiration is $52.00, which is higher than the exercise price of $50.00.
To calculate the profit, we multiply the difference between the stock price and exercise price by the number of contracts, and subtract the initial cost:
Profit = (Stock Price - Exercise Price) * Number of Contracts - Initial Cost
Profit = ($52.00 - $50.00) * 5 - $17.50 = $2.50 * 5 - $17.50 = $12.50 - $17.50 = -$5.00
Therefore, the profit on this trade is -$5.00, resulting in a loss. The correct option for the question is b. -$750.