Assume an option contract is for I underlying share. A call option on TESLA stock has a strike price of $600. The holder of this option exercises the option today when the price of TESLA stock is $630. This means that the holder of the call option_

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Question 16?
Assume an option contract is for 1 underlying share. A call option on TESLA stock
has a strike price of $600. The holder of this option exercises the option today when
the price of TESLA stock is $630. This means that the holder of the call option_
sells a TESLA share today at the price of $600
buys a TESLA share today at the price of $600
buys a TESLA share today at the price of $630
sells a TESLA share today at the price of $630
SEP 1
19
Transcribed Image Text:Assume an option contract is for 1 underlying share. A call option on TESLA stock has a strike price of $600. The holder of this option exercises the option today when the price of TESLA stock is $630. This means that the holder of the call option_ sells a TESLA share today at the price of $600 buys a TESLA share today at the price of $600 buys a TESLA share today at the price of $630 sells a TESLA share today at the price of $630 SEP 1 19
Expert Solution
Step 1

The call option gives the holder the right to purchase a certain number of shares at the strike price, thus if it is exercised, it means that the stock of Tesla was purchased at a price of 600 even if the market price was 630.

The contract's execution price in terms of options is known as the strike price.

All of the other claims are untrue because they have nothing to do with selling Tesla stock.


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