Consider a "C$ Dec 6000 call" selling on the Chicago Mercantile Exchange (CME) at a price of $0.0180/C$. Each CME C$ contract is worth C$125,000. What would be the profit on an investment in this option if the spot rate at expiration is $0.5930/C$?

Question

Quizplus · Accepted Answer

The profit from a call option is calculated as the difference between the spot rate at expiration and the strike price, multiplied by the contract size, minus the premium paid for the option. Here, the spot rate at expiration ($0.5930/C$) is below the strike price ($0.6000/C$), so the option would not be exercised and the loss is equal to the premium paid. The premium paid is $0.0180/C$ * C$125,000 = $2,250. Therefore, the investor would lose $2,250, making choice A correct.

Consider a "C$ Dec 6000 Call" Selling on the Chicago