You wrote ten call option contracts on JIG with a strike price of €40 and an option price of €.40.What is your net gain or loss on this investment if the price of JIG is €46.05 on the option expiration date?

Question

Quizplus · Accepted Answer

The net gain or loss on the investment can be calculated as follows:
Net gain/loss = (selling price - strike price) x number of contracts x option price
= (€46.05 - €40) x 10 x €0.4
= €24.2
However, since the option price is €0.4 per share, the total cost of the option contracts is €400 (10 x €0.4 x 100 shares per contract). Therefore, the net gain on the investment is:
€24.2 - €400 = -€375.8
This is a loss of €375.8, which is closest to option B (-€5,650)

You Wrote Ten Call Option Contracts on JIG with a Strike