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12 November, 05:13

Suppose you purchase one WFM May 100 call contract at $5 and write one WFM May 105 call contract at $2. The maximum loss you could suffer from your strategy is Select one:

a.$200.

b.$300.

c. zero.

d.$500.

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Answers (1)
  1. 12 November, 05:30
    0
    The correct answer is B that is $300

    Explanation:

    The amount of maximum loss which is suffered from the strategy is computed as:

    Amount of maximum loss = (WFM May 100 call contract price + WFM May 105 call contract price) * 100

    = (-$5 + $2) * 100

    = - $3 * 100

    = - $300

    Note: Options contracts are for 100 shares of the stock, so the quoted premium is multiplied by 100.
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