If an investor buys a 100-share call option for $300 with an exercise price of $30 and the underlying price per share of the stock at expiration is $32, what is the amount of profit or loss, ignoring brokerage fees?
A) There would be a profit of $200.
B) There would be a profit of $100.
C) There would be a loss of $100.
D) There would be a loss of $300.

Question

Quizplus · Accepted Answer

The investor pays $300 for the option. At expiration, the stock price is $32, so the option is exercised at $30, giving a profit of ($32 - $30) * 100 = $200. Subtracting the $300 cost of the option, the net result is a loss of $100.

If an Investor Buys a 100-Share Call Option for $300