Kazink and Taranto has given some explanation for my question but both seems to be unsatisfactory. Taranto says delta is not given when I have given delta in my question as del. He also says option price and stock price don't move in tandem he says linear, but Eugene Brigham book on Financial Management and Biermann's book on Financial control treat the matter as linear which I believe is the latest theory. Even though this is hypothetical situation, I have tried with real life IBM options and it produces similar results.
Kazink comes out with the cock and bull explanation about the block sale of 100 in which case let him rephrase my question as 1 block call option of 100 and stocks of 300 in which case the gain from sale of calls is 651 and loss in the stock is 2100 with a net loss of 1449. He said my calculation is wrong, only thing I have done here is raise the written call 3 times which makes it a block sale and hope this satisfies the reality but problem doesn't go away.
2006-10-31
02:18:43
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1 answers
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asked by
Mathew C
5
in
Investing