Suppose a Stock Is Priced at $100 Currently

question 21

Essay

Suppose a stock is priced at $100 currently. You are bullish on the stock and are considering buying May calls with an exercise price of $95 and $105 respectively. The call with an exercise price $95 is priced at $8.50 and the 105 call is quoted at $2.75.What should you consider in deciding which to purchase if you do not plan on exercising prior to maturity? What are the breakeven stock prices for the two calls?

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Definitions:

Positive Reinforcement

A technique in behavior therapy that involves providing a reward to encourage the repetition of a desired behavior.

Negative Reinforcement

A behavior modification process where the removal of an undesirable or unpleasant outcome following a desired behavior increases the likelihood of that behavior in the future.

Adherent Patient

Refers to a patient who closely follows the treatment plan prescribed by their healthcare provider.

Compliant

Indicates adherence or conformity to a rule, standard, or law.