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On January 5, an investor goes long on a call option for 100 shares of Dell common stock with a strike price of $27.50, expiring the last day of February, for $3.50 per share. The market price of Dell on January 5 is $30.75. On the last day of February, the price of Dell is $37. Who has made money and who has lost money on the option transaction, and how much? Disregard any brokerage commissions involved. A. The long party has made $950 and the short party has lost $950. B. The short party has made $275 and the long party has lost $275. C. The short party has made $350 and the long party has lost $350. D. The long party has made $600 and the short party has lost $600. |