What is the payoff of a call option (bought)with an exercise price of $15.00,if the underlying share price is $16.50,at the expiry date of the option?

Question

Quizplus · Accepted Answer

The payoff of a call option is calculated by subtracting the exercise price from the underlying share price. Therefore, the payoff of this call option would be $1.50, because $16.50 - $15.00 = $1.50. The option holder can also choose to sell the option in the market rather than exercising it, which could result in a higher payoff due to time value and market conditions. Therefore, the best choice is D.

What Is the Payoff of a Call Option (Bought)with an Exercise