The profit or loss on a long call at expiry is equal to:

Question

Quizplus · Accepted Answer

C) The profit or loss on a long call at expiry is calculated as the maximum of (S - X) or zero, minus the option premium. Here, S represents the stock price at expiry, and X represents the strike price of the option. The maximum function ensures that the value cannot be negative, reflecting the fact that the option holder will not exercise the option if it would result in a loss (i.e., if S < X). However, the overall profit or loss must account for the premium paid to purchase the option, hence the subtraction of the option premium.

The Profit or Loss on a Long Call at Expiry