# This flashcard is just one of a free flashcard set. See all flashcards!

12

The price of a stock on July 1 is $57. A trader buys 100 call options on the stock with a strike price of $60 when the option price is $2. The options are exercised when the stock price is $65. The trader’s net profit is

A. $700

B.$500

C. $300

D.$600

A. $700

B.$500

C. $300

D.$600

Answer: C

The payoff from the options is 100×(65-60) or $500. The cost of the options is 2×100 or $200. The net profit is therefore 500−200 or $300.

The payoff from the options is 100×(65-60) or $500. The cost of the options is 2×100 or $200. The net profit is therefore 500−200 or $300.

Flashcard info:

Author: CoboCards-User

Main topic: Finance & Investment

Topic: Derivatives

Published: 27.10.2015