You know for certain that a common share of Mystical Inc., worth $25 today, will be worth $55 one month from now. The stock pays no dividends. Which of the following actions would maximize your return on investment (assuming no transaction costs)?
A) Purchase a call option with a strike price of $55.
B) Purchase warrants on the stock (totaling 100 shares) with a strike price of $35.
C) Purchase a put option on the stock with a strike price of $30.
D) Purchase 100 shares of the stock at the current price of $25 per share.
E) Purchase a call option on the stock with a strike price of $25.

Question

Quizplus · Accepted Answer

Purchasing a call option with a strike price of $25 allows you to buy the stock at $25 and sell it at $55, maximizing your return as the option will be deeply in-the-money.

You Know for Certain That a Common Share of Mystical