Peter owns ten European DFG 25 calls with an expiration date in September. Peter bought the calls at a price of $1.05. Today the 25 calls are priced at $13.40. Yesterday, June 14th, DFG stock doubled
In price to $42.80 a share. Today the stock is selling for $37.30 a share. Peter wants to profit from
This sudden price surge before the price falls further. Ignore commissions and trading costs. Peter
Should:
A) Exercise his option, sell 1,000 shares of DFG stock, and make a profit of $12,300.
B) Exercise his option, sell 1,000 shares of DFG stock, and earn a net profit of $11,250.
C) Sell his options and earn a net profit of $12,350.
D) Sell his options and earn a net profit of $13,400.
E) Peter cannot currently profit from owning his DFG calls.
Correct Answer:
Verified
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