Consider a call option on a stock with a strike price of $60. If the stock price at expiration is $50, then the payoff from the call option is $10.

Question

Quizplus · Accepted Answer

The payoff from a call option with a strike price of $60 when the stock price at expiration is $50 is $0, not $10. The owner of the call option would not exercise it since it would be cheaper to buy the stock on the market for $50 rather than exercising the option at a higher price of $60.

Consider a Call Option on a Stock with a Strike