SIE practice questionhardCall options
An investor purchases a XYZ Oct 80 call for $7 when XYZ is $85, then sells the call for $12 the next week. What is their net profit or loss?
- A$700 gain
- B$500 gain✓ Correct answer
- C$1,200 gain
- D$1,900 gain
Explanation
Why B — $500 gain
Profit: ($12 - $7) x 100 = $500. Option sellers keep net premium gain; premiums are multiplied by 100 for contract size.
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