Explanation:
You have purchased a bull spread. You will exercise the call that you purchased for a net profit of (34 − 25) − 3 = $6 per share. The call that you sold will not be exercised, so your net profit is the premium received of $1 per share. Your total net profit is 6 + 1 = $7 per share.
(Book 3, Module 40.2, LO 40.c)
Ultimate access to all questions.
Question 74
Suppose that you buy a call option with an exercise price of $25 for $3 and sell a call option with an exercise price of $35 for $1. If the stock price is $34 at expiration, your net profit per share is closest to:
A
$6.
B
$7.
C
$8.
D
$9.
No comments yet.