Use the table for the questions below
Consider the following information on options from the CBOE for Rackspace.
-Assume you want to buy five call option contracts with an exercise price closest to being at-the-money and that expires December 2010.The current price that you would have to pay for such a contract is:
A)$550
B)$110
C)$475
D)$300
E)$525

Question

Use the table for the questions below
Consider the following information on options from the CBOE for Rackspace.    
-Assume you want to buy five call option contracts with an exercise price closest to being at-the-money and that expires December 2010.The current price that you would have to pay for such a contract is:
A)$550 
B)$110 
C)$475 
D)$300 
E)$525

Quizplus · Accepted Answer

The correct choice is A) $550 because when buying options, the price shown is typically per share, and each contract represents 100 shares. Therefore, if the price per contract is given as $550, it means the price per share is $5.50, which is the total cost for one contract. Since you're buying five contracts, you multiply the cost per contract by the number of contracts (5), but since the question asks for the price of one contract, the answer remains $550, assuming it's the closest to the current market price making it at-the-money.

Use the Table for the Questions Below