Suppose that you purchased a call option on the S&P 100 Index.The option has an exercise price of 1,700, and the index is now at 1,760.What will happen when you exercise the option?
A)You will have to pay $6,000.
B)You will receive $6,000.
C)You will receive $1,700.
D)You will receive $1,760.

Question

Quizplus · Accepted Answer

When you exercise a call option, you have the right to buy the underlying asset at the exercise price. In this case, the underlying asset is the S&P 100 Index, and the exercise price is 1,700. Since the index is now at 1,760, you can buy it at the exercise price of 1,700 and immediately sell it for 1,760, making a profit of $60 per share. If the option is for 100 shares, you will receive $6,000 when you exercise the option.

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