Suppose a stock is priced at $50. You are bullish on the stock and are considering buying March calls with an exercise price of $45 and $55,respectively. The 45 call is priced at $8.50 and the 55 call is quoted at $2.75. What should you consider in deciding which to purchase if you do not plan on exercising prior to maturity?
Be specific.

Question

Suppose a stock is priced at $50. You are bullish on the stock and are considering buying March calls with an exercise price of $45 and $55,respectively. The 45 call is priced at $8.50 and the 55 call is quoted at $2.75. What should you consider in deciding which to purchase if you do not plan on exercising prior to maturity?
 Be specific.

Quizplus · Accepted Answer

The Answer of Suppose a stock is priced at $50. You are bullish on the stock and are considering buying March calls with an exercise price of $45 and $55,respectively. The 45 call is priced at $8.50 and the 55 call is quoted at $2.75. What should you consider in deciding which to purchase if you do not plan on exercising prior to maturity?
 Be specific.

Suppose a Stock Is Priced at $50