You sold (wrote) ﬁve TWX call option contracts with a strike price of $40 when the option was quoted at $3.20. The option expires today when the value of TWX stock is $38.15. Ignoring trading
Costs and taxes, what is the total proﬁt or loss on your investment?
A) -$1,600
B) -$675
C) $0
D) $500
E) $1,600

Question

Quizplus · Accepted Answer

The options expired worthless since the stock price ($38.15) is below the strike price ($40). You keep the premium of $3.20 per option, totaling $1,600 for five contracts (5 contracts x 100 shares/contract x $3.20).

You Sold (Wrote) ﬁVe TWX Call Option Contracts with a Strike