Rise for the option strategy to be more profitable

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Reference no: EM13948542

The current price of a stock is $84, and three-month European call options with a strike price of $85 currently sell for $4.20. An investor who feels that the price of the stock will increase is trying to decide between buying 100 shares and buying 2,000 call options (= 20 contracts). Both strategies involve an investment of $8,400. What advice would you give? How high does the stock price have to rise for the option strategy to be more profitable?

Reference no: EM13948542

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