Suppose that you purchased a call option on the S&P 100 index.The option has an exercise price of 680 and the index is now at 720.What will happen when you exercise the option?
A)You will have to pay $680.
B)You will receive $720.
C)You will receive $680.
D)You will receive $4,000.
E)You will have to pay $4,000.

Question

Quizplus · Accepted Answer

When you exercise a call option, you have the right to buy the underlying asset at the exercise price. The difference between the current index level (720) and the exercise price (680) is 40. Since the S&P 100 index option typically represents 100 times the index, you will receive 40 * 100 = $4,000.

Suppose That You Purchased a Call Option on the S&P