A. The long party to an option is the one who purchases the option and who has the right but not the obligation to exercise it. Here, the long party purchased the call option to buy the stock at $27.50. On the expiration date, the stock’s market price is $37. The long party has made money because he can buy the stock for $27.50 and resell it for $37. However, he also has his cost of $3.50 for the option to consider. So his profit is $37.00 - $27.50 - $3.50 per share = $6.00 per share times 100 shares, which is $600. (Note: the long party could have received approximately the same gain by simply selling the call option on its expiration date.) The short party is the one who has sold the option and who has the obligation to sell the stock at $27.50 to the long party, if the long party chooses to buy it. The short party loses money because he could sell the stock at the market price of $37, but he has to sell it for $27.50 instead. He loses $37.00 - $27.50. However, he has the money received from the sale of the option to partially offset the loss. So his loss is $37.00 - $27.50 - $3.50 = $6.00 per share times 100 shares, which is $600.

B. This answer does not account for the cost of the option.

C. This answer accounts for the cost of the option, but not for the difference between the exercise price of the option and the price of the underlying stock on the expiration date.

D. This answer is the strike price per share divided by 100 shares, which has nothing to do with the question.