Three months ago (in October) you bought one Tesla April Call option. Today (January) you've decided that Tesla's share price has peaked and you want to get out of the long position. What is your profit if you exercise compared to your profit if you execute an offset (reversing) trade? (Calculate the round-trip profit net of the cost of buying the option in October. Express your answer as the difference between the offset profit and profit from exercise. Assume that the option is American and that there is only one share per option contract.) Enter your answer in dollars rounded to the nearest dollar. October (Three months Ago) Tesla Stock Price = $806 April Tesla Call option (X=600) premium = $325 January (Today) Tesla Stock Price = $1003 April Tesla Call option (X=600) premium = $447
Three months ago (in October) you bought one Tesla April Call option. Today (January) you've decided that Tesla's share price has peaked and you want to get out of the long position. What is your profit if you exercise compared to your profit if you execute an offset (reversing) trade? (Calculate the round-trip profit net of the cost of buying the option in October. Express your answer as the difference between the offset profit and profit from exercise. Assume that the option is American and that there is only one share per option contract.) Enter your answer in dollars rounded to the nearest dollar. October (Three months Ago) Tesla Stock Price = $806 April Tesla Call option (X=600) premium = $325 January (Today) Tesla Stock Price = $1003 April Tesla Call option (X=600) premium = $447
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Three months ago (in October) you bought one Tesla April Call option. Today
(January) you've decided that Tesla's share price has peaked and you want to get out
of the long position. What is your profit if you exercise compared to your profit if
you execute an offset (reversing) trade? (Calculate the round-trip profit net of the
cost of buying the option in October. Express your answer as the difference
between the offset profit and profit from exercise. Assume that the option is
American and that there is only one share per option contract.) Enter your answer in
dollars rounded to the nearest dollar.
October (Three months Ago)
Tesla Stock Price = $806
April Tesla Call option (X=600) premium = $325
January (Today)
Tesla Stock Price = $1003
April Tesla Call option (X=600) premium = $447
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