Assume That You Have Purchased a Call Option with a Strike

question 3

Multiple Choice

Assume that you have purchased a call option with a strike price $60 for $5. At the same time, you purchase a put option on the same stock with a strike price of $60 for $4. If the stock is currently selling for $75 per share, calculate the dollar return on this option strategy.

• A) $10
• B) -$4
• C) $5
• D) $6
• E) $15

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Definitions:

Certified Check

is a check for which the issuing bank guarantees availability of funds by verifying the account's balance and then setting aside the check amount.

Cashier's Check

A check issued by a bank, drawn on its own funds rather than that of a personal account, and signed by a cashier.

Drawer's Liability

Refers to the obligation of the drawer (the person who writes a cheque or draft) to ensure the availability of funds in the account for the amount specified for payment to the payee.

Misrepresentation Claim

A legal assertion that one party has made false statements that another party relied on to their detriment.