You purchased six TJH call option contracts with a strike price of $40 when the option was quoted at $2. The option expires today when the value of TJH stock is $43. Ignoring trading costs and taxes,what is your total profit or loss on your investment?
A) $6
B) $600
C) $800
D) $1,200
E) $1,800

Question

Quizplus · Accepted Answer

Each contract represents 100 shares, so you have purchased 6 contracts representing 600 shares.
The cost of buying the contracts was:
$2 x 100 shares x 6 contracts = $1,200
The strike price of the option is $40, and the stock price at expiration is $43, so the option is in-the-money by $3.
The profit per share is $3 - $2 = $1.
So, the total profit is:
$1 x 100 shares x 6 contracts = $600.

You Purchased Six TJH Call Option Contracts with a Strike