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Non-Tech : The Critical Investing Workshop
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To: Voltaire who wrote (5314)2/27/2000 12:36:00 PM
From: alias  Read Replies (3) of 35685
 
V,

I don't understand the "call appreciation". I'm missing something. In simple math it would appear.

1. The buyer paid $6200 to excercise the right to purchase 400 shares of Qcom at $135 ($54,000).

2. Assume the price of the 400 shares went to $170 (market value of $68,000).

3. If he excercised his option he would have bought 400 shares at $54,000+$6200 for a total of $60,200. If he turned around and sold the 400 shares at $170 he would receive $68,000.

4. $68,000 less 60,200 is $7800. Why wouldn't he do this? I really thought this scenario was why one bought calls.

Alias
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