Corn Call Options with a $1

question 8

Multiple Choice

Corn call options with a $1.70 strike price are trading for a $0.15 premium.Farmer Jayne decides to hedge her 20,000 bushels of corn by selling short call options.Six-month interest rates are 4.0% and she plans to close her position and sell her corn in 6 months.What is her profit or loss if spot prices are $1.60 per bushel when she closes her position?

• A) $1,000 loss
• B) $2,000 gain
• C) $2,120 loss
• D) $2,120 gain

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