You purchased a call option for $3.45 seventeen 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%
E)100%,-100%

Question

Quizplus · Accepted Answer

If you exercise the call, your profit is ($51 - $45) - $3.45 = $2.55. The return is $2.55 / $3.45 = 73.9%. If the call expires worthless, you lose the entire premium, resulting in a -100% return.

You Purchased a Call Option for $3