Series 7 practice questionmediumOptions — Call Options Calculation
An investor buys 1 ABC Jan 45 call at $3. At expiration, ABC is trading at $43. What is the investor's gain or loss?
- AGain of $200
- BLoss of $200
- CLoss of $300✓ Correct answer
- DGain of $300
Explanation
Why C — Loss of $300
With the stock at $43, the 45 call is out-of-the-money and expires worthless. The investor loses the entire premium paid: $3 x 100 = $300 loss. Since the stock price ($43) is below the strike price ($45), there is no reason to exercise the call.
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