Series 7 Exam Question 169: Answer and Explanation

Question: 169

An investor who is long a call option will realize a profit if exercising the option when the underlying stock price is

• A. below the strike price minus the premium paid
• B. above the strike price
• C. above the strike price plus the premium paid
• D. below the strike price

Correct Answer: C

Explanation:

C. For an investor to profit when holding a long call, the investor has to exercise the option when the market price is above the strike (exercise) price plus the premium paid.