Purchase Solution

Long position in a call option on IBM common stock

Not what you're looking for?

Ask Custom Question

You have taken a long position in a call option on IBM common stock. The option has an exercise price of $136 and IBM's stock currently trades at $140. The option premium is $5 per contract.

a. What is your net profit on the option if IBM's stock price increases to $150 at expiration of the option and you exercise the option?

b. How much of the option premium is due to intrinsic value versus time value?

c. What is your net profit if IBM's stock price decreases to $130?

Purchase this Solution

Solution Summary

This solution shows step-by-step calculations to determine the net profit and optimum premium of IBM's stock.

Solution Preview

You have taken a long position in a call option on IBM common stock. The option has an exercise price of $136 and IBM's stock currently trades at $140. The option premium is $5 per contract.

a. What is your net profit on the option if IBM's stock price increases to $150 at expiration of the option and you ...

Purchase this Solution


Free BrainMass Quizzes
Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Operations Management

This quiz tests a student's knowledge about Operations Management

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.