Ambrose buys 480,000 call option contracts, each giving him the right to buy 100 shares of Biocyte from the contract writer at specified price of $31 per share on or before a specified date. Thus he owns call options on 48 million (viz. 100 × 480,000) shares of Biocyte, having paid a total of $30 million for these options. This payment (for the right to buy a stock at a predetermined price) is called a call premium. So the call premium per share works out to $0.625 (viz. $30 ÷ 48). When the stock price of Biocyte is supposed to hit $200 as per his expectation, he plans to exercise his options, walking away with a profit of $8.082 billion, as calculated through...
($200 − $31 − $0.625) × 48,000,000
...and a profit margin of 84%
8,082 ÷ 200 ÷ 48 × 100%); i.e.
(regarding the concept of margin) whereby a 0% margin would represent breaking even, a 50% margin would represent doubling, and a 100% margin would represent a zero-amount purchase or an infinite-amount sale, negative margins representing a loss rather than profit.