Buying SPX Calls

SPX Index is between 1410 and 1444 at expiration
 

 
With the SPX exercise settlement value exactly at the strike price of $1410 at expiration, the 1410 call would be at-the-money and have no value.

With SPX at the break-even point of 1444 at expiration, the 1410 call would be in-the-money and exercised.

The cash settlement amount received upon exercise would be:

This amount of $3,400 is the total cost of the call.

If the SPX exercise settlement value is between 1410 and 1444 at expiration, the 1410 call will also be in-the-money and would be exercised. The cash settlement amount received, however, would be less than the total cost of the call, resulting in a partial loss for the position.

For example, say the exercise settlement value is 1425 at expiration. The cash settlement amount received upon exercise would be:

SPX did rise in value, but not as much as anticipated. The call that originally cost a total of $3,400 is now worth $1,500, so the investor can recoup some of its initial purchase price and realize a partial loss.

   $3,400   total premium paid for call
– $1,500   cash settlement amount received at call’s exercise (or sale at intrinsic value)
   $1,900   partial loss

However, the call buyer could have earned interest on the $136,600 not originally committed to this bullish position, which could offset some of the option loss.