Marcie Purchases a Call Option on Interest Rate Futures with an Exercise

question 20

Multiple Choice

Marcie purchases a call option on interest rate futures with an exercise price of 92-10. The premium on the call option is 2-24. Just before the expiration date, the price of Treasury bond futures (which will have a face value of $100,000 at maturity) is 97-14. At this time, Marcie decides to exercise the option and closes out the position by selling an identical futures contract. Marcie's net gain from this strategy is $____.

• A)- 2,687.50
• B)2,687.50
• C)2,375.00
• D)7,437.50
• E)None of these are correct.

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Definitions:

Autocracy

A system of government where absolute power is concentrated in the hands of a single person or a dominant authority.

Socialist

Pertaining to socialism, a political and economic theory advocating for the collective or governmental ownership and administration of the means of production and distribution of goods.

Communist

Relating to a political and social system in which property and resources are collectively owned, with the aim of eliminating class distinctions.

Theocratic

Pertaining to a form of government or a society where religious leaders control political power, often based on the belief that their authority is divinely guided.