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The RTP Corporation has the following call option information. You are interested in purchasing four contracts for the July Call. How much will be the cost of the transactio?
RTP (RTP) Stock Price $100 Call
Expiration Strike Last Volume Open Interest
June 90 4 120 400July 90 4.50 40 200Aug 90 6 70 600

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Parrain

Answer: $1,800

Explanation:

The Cost of Transaction for purchasing contracts is calculated by the formula;

= Option Premium per Call * Lot Size * No. of contracts

When the Lot size is not specified, always use 100.

The Option Premium per call is $4.50.

Number of contracts required for July is potentially 4;

= 4.5 * 100 * 4

= $1,800

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