As you owns stock in a firm that has a pure discount loan due in six months. The loan has a face value of $70,000. The assets of the firm are currently worth $96,000. The stockholders in this firm basically own a call option on the assets of the firm with a strike price of $70,000.
Basically, a call options refers to a financial contracts that give the option buyer the right, but not an obligation to buy a stock, bond, commodity, or other asset or instrument at a specified price within a specific time period.
On an options contract, a strike price refers to the the price at which the underlying security can be either bought or sold once exercised. It is also known as the exercise price and it is a key feature of an options contract.
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