Question

"At that time, the market price of ABC is $44. If the market rises to $58 and the call is exercised (the put expires out the money), the gain or loss is:"

Answer 1

600 loss

Step-by-step explanation:

The computation of the gain or loss is shown below:

Since on Jan, there is a put option of 45 at $3 and the market rises to $58

So it losses by 13 points i.e

= 45 - 58

= 13

Now the total premium points collected is of 7 i.e

= 4 + 3

= 7

So, the remaining points left is

= 13 - 7

= 6

So for 6 points, the net loss is $600