You Purchased a Call Option for a Premium of $4

question 23

Multiple Choice

You purchased a call option for a premium of $4.The call has an exercise price of $29 and is expiring today.The current stock price is $31.What would be your best course of action?

• A) Exercise the call because the stock price is greater than the exercise price.
• B) Do not exercise the call because the stock price is greater than the exercise price.
• C) Do not exercise the call because the difference between the exercise price and the stock price is not enough to cover the amount of the premium.
• D) Exercise the call to get a positive net return on the investment.
• E) Do not exercise the call to avoid a negative net return on the investment.

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Definitions:

Bank Statement

A summary of financial transactions that have occurred over a given period on a bank account.

Service Charge

A fee collected for services provided, often added to a bill in restaurants, hotels, or other service industries.

Interest

The cost of borrowing money or the return earned on an investment, expressed as a percentage of the principal.

Check Stub

A part of a check that is kept for record-keeping purposes, detailing the check's purpose, date, and amount.