You purchase a stock at $70 and simultaneously write a call with a $70 strike price. If the call premium is $4.32, what is your profit per share if the stock price at expiration is $73.64?
A) $4.32
B) $3.64
C) $7.96
D) $0.68
E) -$3.64

Question

Quizplus · Accepted Answer

The profit per share is calculated by adding the call premium received ($4.32) to the difference between the stock price at expiration ($73.64) and the purchase price ($70), which equals $3.64. However, since the stock price at expiration is higher than the strike price, the call will be exercised, and you will sell the stock at $70. Therefore, the profit from the stock sale is $0, and the total profit per share is just the call premium received, which is $4.32.

You Purchase a Stock at $70 and Simultaneously Write a Call