Aaron purchased a call on 35,000 bushels of corn with a strike price of 210. On the expiration date, the corn was selling at $1.98 per bushel. Option contracts on corn are based on 5,000 bushels. Ignore the cost of the call and all transaction costs. What is the payoff on the call contract?
A) -$4,200
B) -$2,100
C) $0
D) $2,100
E) $4,200

Question

Quizplus · Accepted Answer

The payoff on a call option is 0 if the market price is below the strike price at expiration, as the option is not exercised. Here, since $1.98 is less than the strike price of $2.10, the option is not exercised, resulting in a payoff of $0.

Aaron Purchased a Call on 35,000 Bushels of Corn with a Strike