Series 7 practice questionmediumOptions — Call Options Calculation
An investor buys 1 XYZ Oct 60 call at $4. At expiration, XYZ stock is trading at $68. What is the investor's profit?
- A$400✓ Correct answer
- B$800
- C$200
- D$1,200
Explanation
Why A — $400
The call buyer exercises at $60 and can sell at $68 for an $8 gain per share. Subtract the $4 premium paid: $8 - $4 = $4 per share. One contract equals 100 shares, so the profit is $4 x 100 = $400. The breakeven point was $64 ($60 strike + $4 premium).
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