All categories

4 years ago

The the existing spot price relative to the strike price, the valuable the call options will be.

Business

2 answers:

OLga [1]4 years ago

8 0

Answer:

The Higher the existing spot price relative to the strike price the more valuable the call options will be.

Explanation:

Spot price simply refers to how much a particular stock is trading in the market (that is, Market Price of the Stock).

Strike Price, also known as exercise price, is the price at which a person (corporate or individual) can purchase security.

Call options refers to the option to purchase an asset at an agreed price prior to/or at a particular day.

If for instance an employee is presented with Stock Options at a particular price, it will be more attractive for him or her if the price at which it is being offered is lower than it's actual market value. That way, he or she has already made a profit.

For example, if the spot price for the stock of Google is $2000/Unit and it is offered to an employee at $1450, if he elects to buy it at that time, he stands a chance to make $550 on each unit that if he sells whilst the spot price is still reasonable.

Cheers!

Brrunno [24]4 years ago

5 0

Answer:

The higher the existing spot price relative to the strike price, the less valuable the call options will be.

Explanation:

Call options refer to financial contracts in which the buyer of the option has the right, but not obligation, to buy asset or instrument at an already agreed price on or before a particular date. The particular date is also known as the expiration date.

The strike price is refers to the price at which a put or call option can be exercised on or before a particular date.

The spot price refers the current market price at which an instrument or asset is bought or sold now for immediate payment and delivery.

The relationship between the strike price and the spot price is that a call option is most valuable when the strike price is higher than the spot price. At this point, the call option is said to be in the money (ITM). On the other hand, a call option is least valuable when the strike price is lower than the spot price. At this point, the call option is said to be out of the money (OTM).

Based on the explantion above, therefore, the higher the existing spot price relative to the strike price, the less valuable the call options will be.

You might be interested in

Rent collected in advance is: Multiple Choice A shareholders' equity account in the balance sheet. A temporary account, not in t

gulaghasi [49]

Answer:

A liability account in the balance sheet.

Explanation:

When rent is collected in advance, the entries required to be recognized at the point of collection is as follows;

Debit Cash account

Credit Unearned/Deferred rental revenue

The cash account is an asset while the Unearned/Deferred rental revenue is a liability account.

As such, the collection of rent in advance is A liability account in the balance sheet.

3 0

3 years ago

Quanti Co., a calendar year taxpayer, purchased small tools for $5,000 on December 21, 2016, representing the company's only pur

iris [78.8K]

Answer:

1 and a half months worth of depreciation

Explanation:

The advantage of starting to depreciate an asset purchased on December is that next year you will be able to depreciate it for a full year under MACRS. Generally, when you purchase an asset, you have to use the half year convention and your depreciation expense for the first year will be low compared to the second year. But if you start depreciating your asset in the current year, even if you purchased it on December and the depreciation expense is not that significant, the next year you will be able to depreciate it at the second year rate.

7 0

4 years ago

Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates income and losses equally amon

sammy [17]

Answer:

a. Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Cash $30,000.

Explanation:

Given options:

a. Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Cash $30,000.

b. Debit Masters, Capital $14,000; debit Hardy, Capital $14,000; credit Cash $28,000.

c. Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Rowen, Capital $2,000; credit Cash $28,000.

d. Debit Cash $28,000; debit Rowen, Capital $2,000; credit Masters, Capital $15,000; credit Hardy, Capital $15,000.

e. Debit Masters, Capital $9,334; debit Hardy, Capital $9,333; debit Rowen, Capital $9,333; credit Cash $28,000.

The journal entry to record the final distribution is shown below:

Master capital Dr $15,000

Hardy capital Dr $15,000

To Cash $30,000

(Being the final distribution is recorded)

Here debited both capital as it reduced the stockholder equity also it decreased the assets

Hence, the correct option is a.

6 0

3 years ago

A property is under contract for a sales price of $357,800. The buyer will assume the seller's outstanding loan balance of $225,

Anastasy [175]

Answer:

D. $716.00

Explanation:

357,800 / 500 = $715.60

3 0

3 years ago

The problem of scarcity:

natali 33 [55]

Answer:

The correct answer is option b.

Explanation:

The problem of scarcity of resources is the basic problem in the study of economics. This problem exists because the resources are limited and have alternative uses. These resources are used to satisfy unlimited wants and needs.

So we need to determine the efficient allocation of these scarce resources such that we are able to get maximum satisfaction or utility from them.

Because of this scarcity problem, every economic decision involves some trade-off.

8 0

3 years ago

The ____ the existing spot price relative to the strike price, the ____ valuable the call options will be.

The the existing spot price relative to the strike price, the valuable the call options will be.