Scenario 4
Stock surges to $75.00 on a news announcement. DEC 50 Call is exercised.
A is forced to buy 1,000 shares of XYZ for $75,000.00 and immediately sell them at $50,000.00 for a loss of $25,000.00. Since A received the premium of $1,250.00 before, A's net loss is $23,750.00. B buys 1,000 shares for $50,000.00 and paid the premium of $1,250.00 before. These shares are now worth $75,000.00 on the open market. B's net gain is $23,750.00 (same as A's loss, if commission costs are omitted).
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