You purchased six TJH call option contracts with a strike price of $40 when the option was quoted at $1.30. The option expires today when the value of TJH stock is $41.90. Ignoring trading costs and
Taxes, what is your total proﬁt or loss on your investment?
A) $60
B) $320
C) $360
D) $420
E) $540

Question

Quizplus · Accepted Answer

To calculate the total profit or loss on the investment, we first need to calculate the cost of the options:

Cost of 1 option = $1.30 x 100 (each option controls 100 shares) = $130 
Cost of 6 options = $130 x 6 = $780

Next, we need to calculate the value of the options at expiration:

Value of 1 option = ($41.90 - $40) x 100 = $190 
Value of 6 options = $190 x 6 = $1,140

To calculate the profit or loss, we subtract the cost from the value:

Profit or loss = $1,140 - $780 = $360

Therefore, the best choice is C, with a profit of $360.

You Purchased Six TJH Call Option Contracts with a Strike