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Investment advice and corporate finance
Module 12Investment Management and Corporate FinanceAn investor buys a call with a strike of RM5.00 for a premium of RM0.30. At expiry the share is RM5.80. What is the profit per share?
A call's payoff at expiry is max(S − K, 0) = 5.80 − 5.00 = RM0.80. Profit deducts the premium paid: 0.80 − 0.30 = RM0.50. RM0.80 is the payoff before the premium. RM1.10 adds the premium instead of deducting it. RM0.30 is the premium itself, the maximum loss, not the profit. Source: SIDC Module 12 Study Outline (Jul-Dec 2026) Section 7 (Topics 13 Options, 14 Futures, 15 Swaps and Interest Rate Options); J. C. Hull, Options, Futures, and Other Derivatives (as at October 2026).
Confusing payoff (before premium) with profit (after premium).
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