Question

If a customer buys 1 FLB Oct 50 call at 3 and she exercises the option to buy 100 shares when the market is at 60, what is the cost basis of the 100 shares

Answer 1

$5,300

Step-by-step explanation:

A customer buys 1 FLB Oct 50 call at 3 and she exercises the option to buy 100 shares

= 3 × 100 shares

= $300

The customer bought 100 shares at a price of $50

= 50 × 100 shares

= $5,000

Therefore, the cost basis of the 100 shares can be calculated as follows

= $300 + $5,000

= $5,300

Hence the cost basis of the 100 shares is $5,300