Question

Suppose that an investor buys a 100-share call option for $250. It has an exercise price of $60. The underlying price per share of the stock at expiration is $66. What then is the amount of profit or loss, ignoring brokerage fees

Answer 1

$350

Step-by-step explanation:

Call option is profitable when Stock price expires above the Strike price of the option.

Strike price of call = $60

Stock price at expiration = $66

Total profit = Size*(Stock price-Strike price) - Premium paid

Total profit = 100*($66-$60) - $250

Total profit = 100*$6 - $250

Total profit = $600 - $250

Total profit = $350

Thus, the amount of profit (ignoring brokerage fees) is $350.