Suppose the price of a share of ONB stock is $200. An April call option on ONB stock has a premium of $5 and an exercise price of $200. Ignoring commissions, the holder of the call option will earn a profit if the price of the share
A) increases to $204.
B) decreases to $190.
C) increases to $206.
D) decreases to $196.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The holder of the call option will earn a profit if the price of the share increases above the sum of the exercise price ($200) and the premium paid ($5), which is $205. Therefore, if the price increases to $206, the holder can buy the stock at $200 and sell it at $206, making a profit after covering the $5 premium.

Suppose the Price of a Share of ONB Stock Is