Futures and Options (9)

Options (3)

There are two ways to realise your gain.

One, you can exercise your option, that is, you cash in your right to buy 1,000 XXX shares from the seller of your option and $30,000.

Then you sell the 1,000 shares at the market price of $40 and realise your profit

which is $40,000

minus $30,000

less your premium of $3,000

equals $7,000(profit).