You want the right, not the obligation, to buy 600 shares of a stock at a price of $34.50 a share. The 34.50 call option has a quoted price of $0.20 and the $34.50 put option is quoted at $1.50. How much will it cost you to acquire the right you want?
A) $1.20
B) $1.50
C) $120
D) $150
E) $180

Question

Quizplus · Accepted Answer

To acquire the right to buy shares (not the obligation), you would purchase call options. The cost of one call option is $0.20, and since each option contract typically represents 100 shares, the cost for one contract would be $0.20 * 100 = $20. To cover 600 shares, you would need 6 contracts, totaling $20 * 6 = $120.

You Want the Right, Not the Obligation, to Buy 600