You bought nine call option contracts with a strike price of $25.00 and a premium of $.50. At expiration, the stock was selling for $23.75 a share. What is the total profit or loss on your option position if you did not exercise it prior to the expiration date?
A)−$9.24
B)−$10.20
C)$0
D)−$270
E)−$450

Question

Quizplus · Accepted Answer

To calculate the total profit or loss, we need to first calculate the breakeven point. The breakeven point is the strike price plus the premium paid, which is $25.50. Since the stock price is lower than the breakeven point, the option is out of the money and will expire worthless. 
The total loss is the premium paid per contract ($0.50) multiplied by the number of contracts (9) multiplied by the contract size (100), which equals $450. Therefore, the correct answer is E.

You Bought Nine Call Option Contracts with a Strike Price