You Sold (Wrote) Three TXA Call Option Contracts with a Strike

question 321

Multiple Choice

You sold (wrote) three TXA call option contracts with a strike price of $35 when the option was quoted at $2.60. The option expires today when the value of TXA stock is $33.70. Ignoring trading costs and taxes, what is your total profit or loss on your investment?

• A) $0
• B) $260
• C) $390
• D) $780
• E) $1,170

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Definitions:

Taxpayer

An individual or entity that is obligated to make payments to municipal, state, or national governments, including taxes on income, property, or sales.

Single

A tax return designation for single taxpayers who are ineligible for any other filing statuses.

Understatement

The act of reporting less income or overstating deductions than actually occurred, potentially resulting in tax discrepancies.

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.