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correct answers inside...
Posted by: RazorHawk on Jun 17, 08:26 in response to Ghinsberg's post Shorting option
Call options delist at (Box Office - strike price) if the strike price is met.
If the strike price is not met, the call option delists at $0.
The big factor is what price you invested at. This makes a big difference in answering these questions for you.
A) if a call option meets its strike price then it delists at (box office - strike price).
If you shorted Movie X call option [strike price $20] at $5 and the movie makes $22 then you would make a profit. Call Option worth = (Strike price $20 + $5 price) $25 Delist = $23
If you shorted Movie Y call option [strike price $20] at $5 and the movie makes $30 then you would lose money. Call Option worth = (strike price $20 + $5 price) $25 Delist = $30
B) call options delist at $0 if they do not make their strike price.
If you short a call option and it does not meet its strike price, then you double your investment.
If you shorted Movie X call option [strike price $20] at $5 and the movie makes $18 then you would make a profit. Call Option stock price = $5 Delist = $0
You would get your $5/share back... plus $5/share profit from the stock price going from $5 to $0.
Shorting option Ghinsberg Jun 17, 06:42
A. you will pay what you would have received if you were long, so your losses are unlimited, B. your gains are only your initial investment {nm} jwammo Jun 17, 08:11
correct answers inside... RazorHawk Jun 17, 08:26
Every securtity delisting follows the same rules... Buy StarBond Fund 18 Jun 17, 08:29
Correction to B Buy StarBond Fund 18 Jun 17, 08:40
your correction is not complete.... RazorHawk Jun 17, 09:09
It's generally a good idea to never short calls or puts, unless you are certain of the outcome (which is VERY rare). -more- arf Jun 17, 10:06
So, to summarize? (Question not statement) elchan Jun 17, 11:05
correct {nm} RazorHawk Jun 17, 11:22
Thnx! {nm} elchan Jun 17, 13:30
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