A Speculator Purchased a Call Option with an Exercise Price

question 66

Multiple Choice

A speculator purchased a call option with an exercise price of $31 for a premium of $4. The option was exercised a few days later when the stock price was $34. What was the return to the speculator?

• A)25 percent
• B)-25 percent
• C)-3.2 percent
• D)-2.9 percent

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Definitions:

Scatter Plot Line

Might refer to a trend line drawn through a scatter plot to show the direction of the relationship between two variables, although "Scatter Plot Line" is not a standard term.

Correlation

An index quantifying how much two or more variables move in conjunction with one another.

Prediction Error

The difference between the observed values and the values predicted by a model.

Absolute Value

The non-negative value of a number without regard to its sign; essentially, it's the distance of a number from zero on the real number line.