You Sold One Call Option Contract with a Strike Price

question 3

Multiple Choice

You sold one call option contract with a strike price of $55 when the option was quoted at $0.80.The option expires today when the value of the underlying stock is $53.70.Ignoring trading costs and taxes,what is the net profit or loss on this investment?

• A)-$250
• B)-$80
• C)$0
• D)$50
• E)$80

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Definitions:

Financing Activities

Transactions and events that affect the long-term liabilities and equity of a company, including issuing debt and equity.

Note Payable

A written promise to pay a specific sum of money to a bearer or a specified person at a future date or on demand.

Cash Dividends

Profits paid out to shareholders by a corporation based on the number of shares they own.

Statement of Cash Flows

A report detailing how modifications in balance sheet accounts and earnings influence cash and cash equivalents.