Suppose You Purchase One WFM May 100 Call Contract at $5

question 98

Multiple Choice

Suppose you purchase one WFM May 100 call contract at $5 and write one WFM May 105 call contract at $2. If, at expiration, the price of a share of WFM stock is $103, your profit would be

• A) $500.
• B) $300.
• C) zero.
• D) $200.

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Definitions:

Dividend

A distribution of profits by a corporation to its shareholders, often in the form of a payment.

Expected Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of expected values, often used to quantify the risk associated with a particular asset or investment.

Probability Distribution

A mathematical function that describes the likelihood of obtaining the possible values that a random variable can assume.

Nominal Rate of Interest

The stated interest rate on a loan or financial asset, without adjustment for inflation or other factors.