SIE practice questionmediumCall options
An investor buys 1 DEF July 40 call at $3. At expiration, DEF closes at $35. What is the investor’s net gain or loss?
- AGain of $200
- BLoss of $300✓ Correct answer
- CBreak even
- DLoss of $100
Explanation
Why B — Loss of $300
The call expires worthless since the market is below the strike. The buyer loses the premium paid, $3 x 100 = $300.
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