Suppose you think Wal-Mart stock is going to appreciate in the next year. Current price is $100, and the call option ex
Posted: Wed Jul 06, 2022 6:28 pm
Suppose you think Wal-Mart stock is going to appreciate in thenext year. Current price is $100, and the call optionexpiring in one year has an exercise price, X, of $100 and isselling at a price, C, of $10. With $10,000 to invest, youinvest all in 1,000 options (10 contracts). Alternatively, you caninvest all in the stock. What is the rate of return for eachalternative if one year later the stock price is $120?