buying call option

[finmen 7]

suppose that you hold a call option on a share of stock,and also "owe" a
share of stock--that is, you have sold it short.What is the total pay-off to
your portfolio on the exercise date if the price of the stock is above the
strike price?

 

[wr]

Hi finmen

suppose you hold a september call 100
you bought the call for 2.50 with the stock at 99.50
at the expiration date the stock is 101.60
if you want to close your position and the amount of shares in your option
position equals
you short postion in stock than you make a loss of 102.50 -101.60 times your
amount of shares/divided by 100
in effect your loss is bigger as you have interest to be paid over you short
postion
otherwise from a call price lower than 1.60 you make money not taking into
account your costs
of interest.
The Black&s Scholes formula will help you here.

Anyway, I suppose you to make some diagrams in Visio to display these
processes.
I am sorry, I don't know of any

check http://www.cboe.com/TradTool/IVolMain.aspx for some options
calculators (trial)

René