The price of a stock on July 1 is $57.A trader buys 100 call options on the stock with a strike price of $60 when the option price is $2.The options are exercised when the stock price is $65.The trader's net profit is
A) $700
B) $500
C) $300
D) $600

Question

Quizplus · Accepted Answer

The payoff from the options is 100×(65-60)or $500.The cost of the options is 2×100 or $200.The net profit is therefore 500−200 or $300.

The Price of a Stock on July 1 Is $57