Leverage capital more to take advantage of the stock

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Reference no: EM131334376

Compared to the FDX call option above with another FDX call option with an exercise price of $190 and a premium of $1. What might an investor who prefers the $190 strike, $1 call option expect compared to an investor who prefers the $180 strike price, $5 option? Which one would be able to leverage capital more to take advantage of the stock moving to $200 based on some extremely good news about FDX?

Please show your work.

(This is the call option referred to in the above question) A call option on FDX stock specifies a strike price of $180. Today’s price of the stock is $174. The premium on the call option is $5. What price FDX stock price reach in order to break even assuming no transaction costs.

Strike Price + Premium

$180 + $5

= $185

Reference no: EM131334376

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