You Purchased Six TJH Call Option Contracts with a Strike

question 58

Multiple Choice

You purchased six TJH call option contracts with a strike price of $40 when the option was quoted at $1.30. The option expires today when the value of TJH stock is $41.90. Ignoring trading costs and taxes,what is your total profit or loss on your investment?

• A) $60
• B) $320
• C) $360
• D) $420
• E) $540

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Definitions:

Pure Competition

A market structure characterized by a large number of small firms selling identical products, with no single seller having a significant influence on market price.

Oligopoly

A market structure characterized by a small number of large firms dominating the market, leading to limited competition.

Mutually Cancelling Advertising

Mutually cancelling advertising refers to a situation where the competitive advertising efforts of firms negate each other's impact, leading to no significant change in market share.

Economic Efficiency

A state in which resources are allocated in the most beneficial way, maximizing output while minimizing waste and inefficiency.