Explanation

For a call option seller (writer), the profit calculation is:

Profit = Option Premium Received - Max(0, Spot Price at Expiration - Strike Price)

Given:

• Spot price at expiration = $9.35
• Strike price = $9.40
• Option premium received = $1.15

Step 1: Determine if the option is exercised Since the spot price at expiration ($9.35) is below the strike price ($9.40), the call option is out-of-the-money and will not be exercised.

Step 2: Calculate the call seller's profit When the option is not exercised:

• The seller keeps the entire premium received
• No obligation to sell the underlying asset

Profit = Option Premium Received - Max(0, Spot Price - Strike Price) Profit = $1.15 - Max(0, $9.35 - $9.40) Profit = $1.15 - Max(0, -$0.05) Profit = $1.15 - $0 Profit = $1.15

Wait, let me re-examine the options. The calculation shows $1.15, but option C is $1.15. However, looking at the question more carefully:

Actually, the profit to the call seller should be $1.15, which matches option C. But let me double-check the logic:

Call seller's perspective:

• Receives premium upfront: +$1.15
• If option expires worthless (spot < strike), keeps entire premium
• Profit = $1.15

However, the question asks for profit at expiration when spot price is $9.35. The option is out-of-the-money, so the seller's profit is indeed the premium received: $1.15.

But wait, looking at the options: A. $0 B. $1.10 C. $1.15

My calculation gives $1.15, which is option C. However, I need to consider if there's any transaction cost or other factor. Let me re-read the question carefully.

The spot price of the underlying is given as $10.50 initially, but at expiration it's $9.35. The strike is $9.40. Since $9.35 < $9.40, the option expires worthless.

Correct calculation: Call seller profit = Premium received = $1.15

Therefore, the correct answer should be C. $1.15.

Why not $1.10? $1.10 would be incorrect because there's no reason to subtract anything when the option expires out-of-the-money. The seller keeps the entire premium.

Why not $0? $0 would only be if the premium was exactly offset by losses, which doesn't happen here.

Final Answer: C. $1.15