Series 3 easy P/L futures question

Question

1.       An investor purchases a September corn 500 call at .25 when September corn futures are trading at 490. Each corn contract covers 5,000 bushels of corn. The option is out of the money and has a delta of .45. If September corn trades up to 504 and the investor sells the call at .33. What was the investor's profit?

A. $400

B. $1,550

C. $1,250

D. $800

 

Answer 1

The investor purchased and sold the call option. We focus on the profit/loss on the call and not the movement of the corn contract.

The investor made $0.08 trading the option.

Each option covers 5000 bushels of corn

0.08 X 5000 = 400.00

The answer is A.