Question

A call option has an exercise price of $40 per share. If you bought the option...

A call option has an exercise price of $40 per share. If you bought the option for $3, draw a graph of the payout on the option as a function of the stock price. Label the graph.

Homework Answers

Answer #1
Stock Price Payoff from Call 40 Strike (A) Cost of Call Option (B) Profit/(Loss) (A-B)
30 0 3 -3
31 0 3 -3
32 0 3 -3
33 0 3 -3
34 0 3 -3
35 0 3 -3
36 0 3 -3
37 0 3 -3
38 0 3 -3
39 0 3 -3
40 0 3 -3
41 1 3 -2
42 2 3 -1
43 3 3 0
44 4 3 1
45 5 3 2
46 6 3 3
47 7 3 4
48 8 3 5
49 9 3 6
50 10 3 7
51 11 3 8
52 12 3 9
53 13 3 10
54 14 3 11
55 15 3 12
56 16 3 13
57 17 3 14
58 18 3 15
59 19 3 16
60 20 3 17
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