1) You bought call options on a stock and the strike price of the option is $17.
ID: 2725962 • Letter: 1
Question
1) You bought call options on a stock and the strike price of the option is $17. The option has 1 week until expieration and the stock is currently priced at $22 per share. You paid $3 per call option and bought 30 total. What is your net profit or loss from this exchange assuming nothing changes between now and when the options expire?
2) Based on the infiromation in the previous question, graph a net payoff diagram for one of the call options you purchased. Be sure to label clearly including the break-even point.
Explanation / Answer
Ans1. Strike price of 30 options=30*17=510
option premium paid = 30*3= 90
total payment (510+90)= 600
Current price of 30 option = 30*22=660
net profit=660-600=60
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