A call option on euros is written with a strike price of $1.30/euro. Which spot price maximizes your profit if you choose to exercise the option before maturity?
A) $1.20/euro
B) $1.25/euro
C) $1.30/euro
D) $1.35/euro

Question

Quizplus · Accepted Answer

The profit from exercising a call option increases as the spot price of the underlying asset (in this case, euros) increases above the strike price. Since the strike price is $1.30/euro, a spot price of $1.35/euro maximizes your profit by providing the highest difference above the strike price.

A Call Option on Euros Is Written with a Strike