Question

please show work You purchase one (1) call option with strike price 50 for $ 9...

please show work

You purchase one (1) call option with strike price 50 for $ 9 and write three (3) call options with strike 60 for $ 3.

2) When do you break-even (profit=0) at maturity?

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Answer #1
Purchase Call Option Strike price Premium
1 50 9
Write Call Option Strike price Premium
3 60 3
Formula for call purchase
Break even price = Exercise Price+premium
Exercise price = 50
premium = 9
= 50+9
= 59
Formula for call write
Break even price for write= Exercise Price- premium
Premium per option=total premium/ No of option
= 3/3
= 1
Exercise price = 60
premium = 1
= 60-1
= 59
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