You Bought Eight Call Option Contracts with a Strike Price

question 90

Multiple Choice

You bought eight call option contracts with a strike price of $27.50 and a premium of $0.66.At expiration,the stock was selling for $26.90 a share.What is the total profit or loss on your option position if you did not exercise it prior to the expiration date?

• A)-$9.24
• B)-$10.20
• C)$0
• D)-$528
• E)-$920

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Definitions:

Probability Distribution

A function that represents the likelihood of various outcomes in a random experiment.

Average Portfolio Standard Deviation

A measure of the volatility of all the assets in a portfolio, calculated as the square root of the variance of the portfolio's returns.

Coefficient of Correlation

A numerical metric evaluating the magnitude and orientation of a linear correlation between two variables, with values spanning from -1 to 1.

Capital Allocation Line

A graph showing risk-versus-return profiles of different portfolios, including the risk-free rate and a combination of risky assets, guiding optimal asset allocation.