You Purchased Eight LJK Call Option Contracts with a Strike

question 416

Multiple Choice

You purchased eight LJK call option contracts with a strike price of $42.50 when the option was quoted at $.65. The option expires today when the value of LJK stock is $43.16. Ignoring trading costs and taxes, what is the total profit or loss on your investment?

• A) $.33
• B) $2.40
• C) $8.00
• D) $12.50
• E) $14.00

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Definitions:

Credit Totals

The aggregate amount of credit entries recorded in a financial system or ledger.

Trial Balance

A spreadsheet where the totals of all ledger balances are gathered into equal totals in debit and credit columns for accounts.

Debit Column

A column in financial accounting used to record entries that decrease liabilities and increase assets or expenses.

Credit Column

A section on the right side of an accounting ledger used to record increases in liability, equity accounts, and revenue, or decreases in assets and expense accounts.