Theresa Sold Ten Call Option Contracts with a Strike Price

question 34

Multiple Choice

Theresa sold ten call option contracts with a strike price of $25 when the option was quoted at $.55 per share. The options expire today when the value of the underlying stock is $24.10. Ignoring trading costs and taxes, what is the net profit on this investment?

• A) −$35
• B) −$350
• C) $0
• D) $55
• E) $550

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Definitions:

Potential Energy

Energy stored in the position or arrangement of a system’s components.

Kinetic Energy

The energy that an object possesses due to its motion.

Facilitated Diffusion

Passive transport mechanism in which a solute follows its concentration gradient across a membrane by moving through a transport protein.

Concentration Gradient

A variation in the concentration of a substance across a distance.