Ask Question
23 October, 12:10

Which security should sell at a higher price: A call option on a stock selling at $40, or a call option on another stock selling at $50 (all other relevant features of the stocks and options is assumed to be identical.) Explain.

+2
Answers (1)
  1. 23 October, 14:57
    0
    A call option on a stock selling at $40

    Explanation:

    A call option confers a right and not the obligation on it's holder to buy a security at a pre determined price known as strike price or exercise price before or at expiration date.

    A call buyer exercises his right when strike price is lower than the current market price.

    Call buyer's profit is expressed as;

    =Current Market Price - Strike Price - Option premium paid

    The lower the strike price, the higher the stock sells since there exists possibility of earning a greater profit.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Which security should sell at a higher price: A call option on a stock selling at $40, or a call option on another stock selling at $50 ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers