You write one IBM July 120 call contract for a premium of $4. You hold the option until the expiration date when IBM stock sells for $121 per share. You will realise a ________ on the investment.
A)$300 profit
B)$200 loss
C)$600 loss
D)$200 profit

Question

Quizplus · Accepted Answer

The call option was sold for a premium of $4, which is $400 for one contract (100 shares). At expiration, the stock price is $121, which is $1 above the strike price of $120. The option is exercised, and you lose $100 (1 x 100 shares), but since you received $400 initially, your net profit is $300 ($400 - $100).

You Write One IBM July 120 Call Contract for a Premium