Suppose you purchase one WFM May 100 call contract at $5 and write one WFM May 105 call contract at $2. The maximum potential profit of your strategy is ________, if both options are exercised.
A)$600
B)$500
C)$200
D)$300

Question

Quizplus · Accepted Answer

The maximum potential profit is calculated by the difference in strike prices minus the net premium paid. Here, the difference in strike prices is $5 (105 - 100), and the net premium paid is $3 (5 - 2). Therefore, the maximum profit is $5 - $3 = $2 per share, or $200 for the contract (since each contract is for 100 shares).

Suppose You Purchase One WFM May 100 Call Contract at $5