Series 7 practice questionhardOptions — Call Buyer Scenario
An investor buys 3 XYZ Apr 55 calls at $4 each. At expiration, XYZ is at $65. What is the total profit?
- A$1,200
- B$1,800✓ Correct answer
- C$3,000
- D$600
Explanation
Why B — $1,800
Each call gains $10 in intrinsic value ($65 - $55 = $10) minus the $4 premium = $6 profit per share. With 3 contracts at 100 shares each: $6 x 300 shares = $1,800 total profit. The breakeven was $59 ($55 + $4), and the stock at $65 is well above that level.
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