You Wrote Three Call Option Contracts with a Strike Price

question 160

Multiple Choice

You wrote three call option contracts with a strike price of $55 and an option premium of $.70. What is your net gain or loss on this investment if the price of the underlying stock is $53.30 on the option expiration date?

• A) -$720
• B) -$300
• C) -$210
• D) $210
• E) $720

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Definitions:

Unamortized Premium

The portion of a bond premium that has not yet been amortized or gradually written off over the life of the bond.

Installment Note

A debt instrument that requires a series of periodic payments (installments) of principal and interest over a specific period until the debt is paid off.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, used in the discounting of future cash flows to understand their value in present terms.

Annual Payment

The amount of money that is paid once every year, either as an obligation, such as a loan repayment, or as part of a periodic agreement.