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What's the profit at maturity of a short call sold at 10 that has a strike 100, if the underlying asset price is 80?

A.20
B.-10
C. 10
D. 0

1 Answer

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Final answer:

The profit for the seller of a short call option with a sold price of 10 and strike price of 100 when the underlying asset price is at 80 at maturity, is 10 (Option C). This is because the option expires worthless if the asset price is below the strike price.

Step-by-step explanation:

short call option:

The profit at maturity of a short call option that was sold at 10 and has a strike price of 100, with the underlying asset price at 80 at maturity, is 10 (Option C). When the seller of a call option has a strike price higher than the market price of the underlying asset at the time of expiration, the option is out of the money (OTM) and is therefore worth nothing to the holder.

Since the option is not exercised by the holder, the seller gets to keep the entire premium received when the option was sold. In this scenario, the seller sold the call option for 10. The market price at maturity is 80, which is below the strike price of 100. This means the option is not exercised and the seller's profit is simply the premium received, which is 10.

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