Note all Calls and Puts are lots of 100 shares and Price at

Note - all Calls and Puts are lots of 100 shares and Price at expiration is $50. What is your profit from the following transaction (note per share costs quoted). Profit is how much you made or how much you didn\'t lose.

Long Call $38 Strike Price

             $12 Premium Paid

Solution

Premium paid = 100 x 12 = $ 1200

Gain due to favorable movement = 100 x (50 - 38) = $ 1200

Profit = Gain - Premium paid = 0