Suppose that in June 2013 you bought a call option that allows you to buy 100 shares of a certain stock for $20 before October 2013. If the market price of the stock at some point before October 2013 is $23, and you exercise your option, what will happen?
A) You will make a $30.00 profit.
B) You will make a $300.00 profit.
C) You will make a $3000.00 profit.
D) You will incur a loss of $30.00.
E) You will incur a loss of $300.00.

Question

Quizplus · Accepted Answer

If you exercise your call option at a strike price of $20 and the market price of the stock is $23, you can buy 100 shares for $20 each and immediately sell them for $23, earning a profit of $3 per share. Multiply the profit per share by the number of shares in the option (100), which results in a profit of $300.

Suppose That in June 2013 You Bought a Call Option