You purchased a call option for $3.45 17 days ago.The call has a strike price of $45, and the stock is now trading for $51.If you exercise the call today, what will be your holding-period return? If you do not exercise the call today and it expires, what will be your holding-period return?
A)173.9%, -100%
B)73.9%, -100%
C)57.5%, -173.9%
D)73.9%, -57.5%

Question

Quizplus · Accepted Answer

If you exercise the call, your profit is ($51 - $45) - $3.45 = $2.55. The holding-period return is $2.55 / $3.45 = 73.9%. If you do not exercise and it expires, you lose the entire premium, resulting in a -100% return.

You Purchased a Call Option for $3