If an investor buys a 100-share call option for $325 with an exercise price of $15 and the underlying price per share of the stock at expiration is $13, what is the amount of profit or loss, ignoring brokerage fees?
A) There would be a profit of $525.
B) There would be a loss of $125.
C) There would be a loss of $325.
D) There would be a loss of $525.

Question

Quizplus · Accepted Answer

If the investor exercises the option, they would be buying 100 shares of the stock at $15 per share, which would cost them $1,500. However, since the current market price is only $13 per share, the investor would have a loss of $200 per share, or $20,000 for the entire position. Therefore, taking into account the cost of the option ($325), the total loss would be $20,325.

If an Investor Buys a 100-Share Call Option for $325