The Market Price of ABC Stock Has Been Very Volatile

question 434

Multiple Choice

The market price of ABC stock has been very volatile and you think this volatility will continue for a few weeks. Thus, you decide to purchase a one-month call option contract on ABC stock with a
Strike price of $25 and an option price of $1.30. You also purchase a one-month put option on ABC
Stock with a strike price of $25 and an option price of $.50. What will be your total profit or loss on
These option positions if the stock price is $24.60 on the day the options expire?

• A) -$180
• B) -$140
• C) -$100
• D) $0
• E) $180

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Definitions:

Annual Reports

Comprehensive reports on a company's activities throughout the preceding year, intended to give shareholders and other interested parties information about the company's financial performance.

Footnotes

Additional information provided in financial statements to clarify figures or add context for readers.

Cost Method

A valuation approach in accounting that assigns the initial purchase price to inventories or investments.

Treasury Stock

Shares of a company's own stock that it has reacquired from shareholders, but not retired, and are available for reissuance or other corporate uses.