The seller of a call option (with an exercise price of $18.50, sold for $1.05)over JB Hi-Fi shares will make a loss of $1.26 per share if the holder exercises when the share price is $19.76.

Question

Quizplus · Accepted Answer

The profit or loss for the seller of a call option when exercised is calculated by subtracting the share price at exercise ($19.76) from the sum of the exercise price ($18.50) and the premium received ($1.05). This gives $18.50 + $1.05 - $19.76 = -$0.21, not -$1.26. Therefore, the seller would make a loss of $0.21 per share, not $1.26.

The Seller of a Call Option (With an Exercise Price