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Wed 24 Dec, 2008 10:53 am
A stock is currently trading at $7.28
A call option with $7.50 strike is .75
.75 x 100 = $75 + $14 (approx comm) = $89 cost for the option
In order to break even...
$89 option cost / 100 = .89 + the $7.50 strike = $8.39 (PPS has to hit)
8.39 - 7.28 / 7.28 = 15.3%
So the pps would have to increase 15.3% (within the contract time) just to break even on the $7.50 option that cost $89?
That seems a little steep.
Am I missing something?
@Buffalo,
Those are the numbers I get.