Options Supervisor’s Course (OPSC) 33

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.

In this scenario, the investor buys a call option with a strike price of $55 for a premium of $3. At expiration, if the stock price rises to $65, the intrinsic value of the call option can be calculated as follows: 1. **Calculate the intrinsic value of the call option at expiration**: \[ \text{Intrinsic Value} = \max(0, \text{Stock Price} – \text{Strike Price}) = \max(0, 65 – 55) = 10 \] 2. **Calculate the total profit from the long call position**: The profit from the long call option is calculated by subtracting the premium paid from the intrinsic value: \[ \text{Profit} = \text{Intrinsic Value} – \text{Premium Paid} = 10 – 3 = 7 \] Thus, the investor’s profit from this long call position is $7. This scenario illustrates the importance of understanding the payoff structure of options, as outlined in the Canadian Securities Administrators (CSA) guidelines. The CSA emphasizes that investors must be aware of the risks and rewards associated with options trading, including the potential for total loss of the premium paid if the option expires worthless. Furthermore, the investor should also consider market conditions and volatility, as these factors can significantly impact the pricing and profitability of options. In summary, the correct answer is (a) $7, as it reflects the net profit after accounting for the premium paid for the call option. Understanding these calculations is crucial for any investor engaging in options trading, particularly in the context of Canadian securities regulations, which mandate that investors have a clear understanding of the products they are trading.