If,for a $1000 premium,you buy a $100,000 call option on bond futures with a strike price of 110,and at the expiration date the price is 114,your ________ is ________.

Question

Quizplus · Accepted Answer

The call option gives the holder the right to buy the underlying asset (bond futures) at the strike price of 110. If the price at the expiration date is 114, the option holder will exercise the option and buy the bond futures at the lower strike price of 110, and then sell them immediately at the higher market price of 114.

The profit would be calculated as follows: 
(114 - 110) x $1,000 = $4,000
Minus the initial premium paid for the option: $4,000 - $1,000 = $3,000

Therefore, the answer is C) profit; $3,000.

If,for a $1000 Premium,you Buy a $100,000 Call Option on Bond