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16-11-2019
Business

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Assume a pension fund purchased stock at $53. Call options at a $50 exercise price presently have a $4 premium per share. The pension fund sells a call option on the stock it owns. If the call option is exercised when the price of the stock is $56, what is the gain or loss per share to the pension fund (including its gain from holding the stock as well)?

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valetta valetta

16-11-2019

Answer:

$1

Explanation:

Data provided in the question:

Purchasing price of stock = $53

exercise price of the stock = $50

Price of the stock = $56

Premium per share = $4

Now,

The gain is calculated as :

Gain = exercise price + Premium per share - Purchased stock

or

Gain = $50 + $4 - $53

or

Gain = $1

Hence,

The gain per share to the pension fund is $1

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