Suppose that you purchased a call option on the S&P 100 index.The option has an exercise price of 700 and the index is now at 760.What will happen when you exercise the option?
A)You will have to pay $6,000.
B)You will receive $6,000.
C)You will receive $700.
D)You will receive $760.
E)You will have to pay $7,000.

Question

Quizplus · Accepted Answer

When you exercise the call option with an exercise price of 700 and the index is at 760, you will receive the difference between the index value and the exercise price, which is (760-700) = $60 per share. Since the S&P 100 index is composed of 100 stocks, the total amount you will receive is $6,000 (100 shares x $60 per share). Therefore, the correct answer is (B) "You will receive $6,000."

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