You simultaneously purchase an underlying stock at 30 and wr

You simultaneously purchase an underlying stock at $30 and write an at-the-money call (exercise price $30) on the stock. The option premium is $6. What is the profit for your strategy if the underlying stock at expiration of the call is $21?

A. $6

B.$3

C. $0

D. ?$3

E. ?$6

Solution

Loss on the stock 30 - 21 = 9

premium = 6

loss on the option = 0 since the option expires worthless

net gain = 6 - 9 = -3