You sold one call option contract with a strike price of $42.50 when the option was quoted at $1.10. The option expires today when the value of the underlying stock is $38.10. Ignoring trading costs
And taxes, what is your net proﬁt or loss on your investment?
A) -$550
B) -$110
C) $0
D) $110
E) $550

Question

Quizplus · Accepted Answer

When you sell a call option, you receive a premium upfront. In this case, you received $1.10 for selling the one call option contract. 
If the option expires today and the value of the underlying stock is $38.10, the option will not be exercised because the current stock price is below the strike price of $42.50. This means that you get to keep the premium as your profit. 
Therefore, your net profit is the premium received, which in this case is $1.10 or $110 for one contract.

You Sold One Call Option Contract with a Strike Price