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What is dollar profit or loss

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Reference no: EM131222370

Suppose you own a stock that is currently trading for $65. You purchased it for $60. You would like to wait a while before you sell it because you think there is a good chance the stock will increase further.

1. How can you structure a transaction that will insure that you can sell the stock for $65, even if it falls below that price, say, to $60 or $55.

2. If that option costs you $5 and the stock reaches $75, at which time you sell it, what was your dollar profit? Did you exercise the option? Why or why not? Was buying the option a "waste of money"?

3. If the price of the stock falls to $7, what is your dollar profit or loss?

Reference no: EM131222370

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