Chapter 02 · Section 2.1

Profit or loss on a per share basis

Shawn is the holder of a call option, i.e. he is long a call option. It is a Ford Dec 30 call and the premium he paid was $ 2 per share. At expiration in December Ford shares trade at $ 30. What is the profit or loss on a per share basis?

a) 2
b) 0
c) 200
d) -200
• e) -2
  Yes. If Ford shares trade at 30, the loss will be $ 2 per share. It would not be worth exercising the option. Shawn lost the money he invested in the option, i.e. 100 times $ 2, since there are 100 shares per option. Continue
  f) -20

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