You own four call option contracts on Webster South stock with a strike price of $17.50. When you purchased the shares the option price was $.85 and the stock price was $16.90. What is the intrinsic value of your investment if Webster is currently selling for $16.40 a share?
A) -$440
B) -$240
C) $0
D) $240
E) $440

Question

Quizplus · Accepted Answer

The intrinsic value of a call option is the difference between the stock's current price and the strike price, but only when the stock's price is above the strike price. Since Webster is currently selling for $16.40, which is below the strike price of $17.50, the intrinsic value of the call options is $0.

You Own Four Call Option Contracts on Webster South Stock