Assume a pension fund purchased stock at $53. Call options at a $50 exercise price presently have a $4 premium per share. The pension fund sells a call option on the stock it owns. If the call option is exercised when the price of the stock is $56, what is the gain or loss per share to the pension fund (including its gain from holding the stock as well?

Asked 6 months ago

Viewed 773861 times

a. $4 gain
b. $6 loss
c. $2 loss
d. $1 gain
e. $0

Order by

Answer:

d.$1 gain

Explanation:

Calculation for what is the gain or loss per share to the pension fund

Gain per share = Stock Purchased- Exercise price + Premium per share

Let plug in the formula

Gain per share = $53-$50 + $4

Gain per share=$53-$54

Gain per share= $1

Therefore the gain or loss per share to the pension fund will be $1 gain

Edit

15.5k 3 10 26

answered 6 months ago