You wrote three call option contracts with a strike price of $55 and an option premium of $.70. What is your net gain or loss on this investment if the price of the underlying stock is $53.30 on the option expiration date?
A) -$720
B) -$300
C) -$210
D) $210
E) $720

Question

Quizplus · Accepted Answer

Since the price of the underlying stock is $53.30, which is below the strike price of $55, the options will expire worthless. This means the writer of the call options (you) gets to keep the entire premium collected. The total premium collected is the option premium ($0.70) times the number of contracts (3) times the contract multiplier (usually 100 shares per contract), which equals $210 ($0.70 * 3 * 100). Therefore, your net gain is $210.

You Wrote Three Call Option Contracts with a Strike Price