You pay $3.25 for a call option on Luther Industries that expires in three months with a strike price of $40.00.Three months later,at expiration,Luther Industries is trading at $41.00 per share.Your profit per share on this transaction is closest to:
A)-$1.00
B)$1.00
C)-$2.25
D)$2.25
E)$0

Question

Quizplus · Accepted Answer

The profit per share is calculated by subtracting the cost of the call option ($3.25) from the difference between the stock price at expiration ($41.00) and the strike price ($40.00). This gives a profit of $1.00 per share. However, since you paid $3.25 for the option, your net profit is -$2.25 per share.

You Pay $3