Tom Smith Purchases 100 Shares of DOUBLE Systems Stock for $63

question 41

Multiple Choice

Tom Smith purchases 100 shares of DOUBLE Systems stock for $63 per share and wishes to hedge his position by writing a 100 share call option on his holdings. The option has a $65 strike price and a premium of $8.75. If the stock is selling at $64 at the time of expiration, what will be the overall dollar gain or loss on this covered option play? (Consider the change in stock value as well as the gain or loss on the option.)

• A)$975.00
• B)$875.00
• C)$775.00
• D)$100.00
• E)$87.50

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Definitions:

Collectivistic Cultures

Cultures that emphasize the needs and goals of the group over the individual.

Interdependent Self-construal

A concept of self that is fundamentally connected to and defined by relationships with others, emphasizing social context and interactions.

Analytical Cognition

A cognitive style characterized by logical reasoning, systematic analysis, and a focus on objective evaluation of information.

Homogenous

Consisting of parts or elements that are all the same or similar in nature.