Suppose that you purchased a call option on the S&P 100 Index.The option has an exercise price of 1,680, and the index is now at 1,720.What will happen when you exercise the option?
A)You will have to pay $1,680.
B)You will receive $1,720.
C)You will receive $1,680.
D)You will receive $4,000.

Question

Quizplus · Accepted Answer

When you exercise a call option on an index like the S&P 100, you receive the difference between the current index level (1,720) and the exercise price (1,680), not the actual stocks or index units. This difference is $40 per index point. Since these contracts typically represent $100 per index point, you will receive $40 x $100 = $4,000.

Suppose That You Purchased a Call Option on the S&P