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 realize 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 point x 100 shares), but you keep the $400 premium, resulting in a $300 profit ($400 - $100).

You Write One IBM July 120 Call Contract for a Premium