A stock currently trades at $110. June call options on the stock with a strike price of $120 are priced at $5.75. Calculate the dollar return on one call contract.
A) -$1000
B) $1000
C) $575
D) -$575
E) $0

Question

Quizplus · Accepted Answer

The call option is out of the money (strike price $120 > stock price $110), so it expires worthless. The loss is the premium paid, which is $5.75 per share. One contract is for 100 shares, so the total loss is $5.75 * 100 = $575.

A Stock Currently Trades at $110