If the price is $4 for a call option with strike of $30, what are the...
If the price is $4 for a call option with strike of $30, what are the payoff and profit on a long position, if the option expires when the stock is $38.5?
Homework Answers
Payoff = Max(0 , S - X)
= Max(0 , 38.5 - 30) = $8.5
Profit = Price of Underlying - Strike Price of Long Call - Premium Paid
= $38.5 - $30 - $4 = $4.5
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