My Math Forum European call option

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 April 25th, 2013, 05:18 PM #1 Newbie   Joined: Apr 2013 Posts: 1 Thanks: 0 European call option Suppose that you purchase for 4 dollars a European call option with a strike price of 50 dollars. If the stock price on the exercise date is 38 dollars, what is your profit? Assume the risk-free interest rate is r=0. Please guide me through on how to solve this problem. It seems pretty simple but I think I am missing something. What I did: So = $4 and K =$50 so Vo = $4-$50 = -$46. S1 =$38 so V1 = $38 -$50 = -$12 Profit = -$12 + $46 =$34 (which is the wrong answer)
 September 9th, 2013, 06:59 AM #2 Newbie   Joined: Sep 2013 Posts: 9 Thanks: 0 Re: European call option Actually it is quit simple: Your investment is USD 4. On Expiration your call is worthless(=max(0,38-50)=0) So you lose USD 4

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