You purchased 1 SPX call option with a strike of 1500. You wrote one SPX call option with the same maturity date and a strike of 1450. At maturity, what is your payoff if the S&P 500 is at 1475?
A)−$2,500
B)−$250
C)$25
D)$250
E)$2,500

Question

Quizplus · Accepted Answer

The payoff from the long call option (strike price of 1500) is $0 because the S&P 500 did not exceed the strike price, rendering it worthless. The written call option (strike price of 1450) results in a loss because the S&P 500 ended up at 1475, which is $25 above the strike price. Since options contracts typically represent 100 shares, the loss is 25 * 100 = $2,500.

You Purchased 1 SPX Call Option with a Strike of 1500