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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?

Group of answer choices
A.20
B.-10
C. 10
D. 0

User Patrikbeno
by
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1 Answer

3 votes

Final answer:

The profit is the premium of $10 kept by the seller, as the call option expires worthless when the underlying asset's price ($80) is below the strike price ($100). Therefore, the correct option is C.

Step-by-step explanation:

The profit at maturity of a short call option that was sold for $10, with a strike price of $100, when the underlying asset price is $80 at expiry, can be calculated as follows:

The option will expire worthless since the underlying price ($80) is less than the strike price ($100). The option seller gets to keep the premium of $10 as profit. There's no obligation for the option seller to sell the underlying asset because it has not reached the strike price, hence no additional cost incurred.

Therefore, the answer is C. 10.

User Attiya
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8.6k points