Suppose that you purchased a call option on the S&P 100 Index. The option has an exercise price of 1,700, and the index is now at 1,760. What will happen when you exercise the option?
A) You will have to pay $6,000.
B) You will receive $6,000.
C) You will receive $1,700.
D) You will receive $1,760.
E) You will have to pay $7,000.

Question

Quizplus · Accepted Answer

When you exercise a call option, you profit from the difference between the current market price and the exercise price, if the market price is higher. Here, the difference is 1,760 - 1,700 = 60 points. Since each point in the S&P 100 Index option is worth $100, you will receive 60 * $100 = $6,000.

Suppose That You Purchased a Call Option on the S&P