Suppose That in June 2018 You Bought a Call Option

question 314

Multiple Choice

Suppose that in June 2018 you bought a call option that allows you to buy 100 shares of a certain stock for $20 before October 2018.If the market price of the stock at some point before October 2018 is $23,and you exercise your option,what will happen?

• A)You will make a $30.00 profit.
• B)You will make a $300.00 profit.
• C)You will make a $3000.00 profit.
• D)You will incur a loss of $30.00.
• E)You will incur a loss of $300.00.

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Definitions:

Output

The aggregate quantity of products or services generated by a company, sector, or economic system within a specified timeframe.

Profit-Maximizing

The process or strategy of adjusting production and sale operations to achieve the highest possible profit.

Monopolist

A single seller in a market who has significant control over the price and supply of a particular good or service.

Profit

The financial gain obtained when revenues generated from business activities exceed the expenses, costs, and taxes needed to sustain the operation.