Question: DePaul Insurance Company purchased a call option on an S&P 500 futures contract. The option premium is quoted as $6. The exercise price is $1,430.

DePaul Insurance Company purchased a call option on an S&P 500 futures contract. The option premium is quoted as $6. The exercise price is $1,430. Assume the index on the futures contract becomes $1,440. Should DePaul exercise the call option or let it expire? What is the net gain or loss to DePaul after accounting for the premium paid for the option?

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