Suppose Mr. Optimist holds a one-year call option on TIX common stock.

It is a European call option and can be exercised at $150. Assume that the expiration date has arrived. What is the value of the TIX call option on the expiration date? If TIX is selling for $200 per share, Mr. Optimist can exercise the option—purchase TIX at $150—and then immediately sell the share at $200. Mr. Optimist will have made $50 (= $200 − 150) . The price of this call option must be $50 at expiration.

Instead, assume that TIX is selling for $100 per share on the expiration date. If Mr. Optimist still holds the call option, he will throw it out. The value of the TIX call option on the expiration date will be zero in this case.