If a writer sells a naked call for Intel with an exercise price of $100 for $9 and the stock is selling for $115 at the time of expiration, what is the profit or loss for the writer?

Question

If a writer sells a naked call for Intel with an exercise price of $100 for $9 and the stock is selling for $115 at the time of expiration, what is the profit or loss for the writer?

Quizplus · Accepted Answer

The writer of a naked call incurs a loss when the stock price exceeds the exercise price at expiration. The loss is calculated as the difference between the stock price at expiration ($115) and the exercise price ($100), minus the premium received ($9). Thus, the loss is $115 - $100 - $9 = $6, making it a negative outcome for the writer.

If a Writer Sells a Naked Call for Intel with an Exercise