Suppose you purchase one IBM May 100 call contract at $5 and write one IBM May 105 call contract at $2.
-The maximum potential profit of your strategy is ________ if both options are exercised.

Question

Quizplus · Accepted Answer

The maximum potential profit of the strategy is the difference in the strike prices minus the net premium paid/received. In this case, the difference in the strike prices is $105 - $100 = $5. The net premium paid/received is $5 - $2 = $3. Therefore, the maximum potential profit is $5 - $3 = $2 per contract. Since there is only one contract, the maximum potential profit is $2. Therefore, the correct answer is C) $200.

Suppose You Purchase One IBM May 100 Call Contract at $5