You Sell an IBM Call Option for $4

question 17

Multiple Choice

You sell an IBM call option for $4. The strike price of the option is $120, and the maturity is one year. At maturity, the price of the IBM stock is $126. Your profit/loss over the entire transaction is:

• A) $3 profit
• B) $2 loss
• C) $6 loss
• D) $4 profit

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Definitions:

Market Value

The current price at which an asset or service can be bought or sold in the market.

Total Assets

Represents the sum of all funds, properties, and assets owned by a company or individual at a given time.

Defensive Mergers

Mergers undertaken by companies to protect against potential threats, improve market position, or mitigate weaknesses.

Shareholders' Wealth

Refers to the overall value of the shares an investor holds in a company, which increases as the company's value goes up.