or giving someone else the right to buy the stock. The investor collects the option premium and hopes the option expires worthless (below strike price). This strategy generates additional income for the investor
Investors pay a premium to buy a long call option, and they do so in the expectation of improved profits. However, if the price drops below the strike price, the option holders lose the premium paid. For example, let us assume that the stock’s strike price is Rs. 5000 and the ...
For example, suppose ABC Company’s stock is selling at $40 and a call option contract with a strike price of $40 and an expiry of one month is priced at $2. The buyer is optimistic that the stock price will rise and pays $200 for one ABC call option with a strike price of $40...
If the stock's market price rises above the strike price, the option is considered to be “in the money.” An in the money call option has “intrinsic value” because the market price of the stock is greater than the strike price. The buyer has two choices: First, the buyer could cal...
3) If the stock price is above the strike price of the option, your stock will be bought from you at the strike price of the option, this is called assignment or exercising the option. 4) If the stock price is below the strike price of the option, the option expires worthless, the ...
Of course, once you exercise the options, you have to pay for the stock at the strike price—$50 in this case. But you would do so only if the stock price had risen high enough for the option to bein the money—a term that implies an option is worth exercising because the stock pr...
Answer to: A call option with a strike price of $54 on a stock selling at $61 costs $8.6. What are the call option's intrinsic and time values? By...
If the stock's current price is below the strike price, we say your option contract is out of the money. Call potential profit: Refers to the profit you could make for the operation minus call option costs, expressed in percentage. Call potential return: Refers to the profit you could ...
1A European stock index call option has a strike price of 1,160 and a time to expiration of 0.25 years. Given a risk-free rate of 4 percent, if the underlying index is trading at 1,200 and has a multiplier of 1, then the lower bound forthe option price is closest to:[单选题...
A cash-backed call option, also known as a cash-secured call, is an option strategy where an investor buys a call option while setting aside enough cash to buy the stock at the strike price. A cash-secured call is used when an investor wants to purchase