16

A trader buys a European call option on a share of stock with an exercise price of $100, an option premium of $10 and a time to the expiration date of 6 months. Consider the following statements on the profit/loss of the trader on the expiration date. 1. The trader's breakeven stock price is $105. II. The trader's maximum profit is unlimited. III. The trader's maximum loss is $100. IV. If the stock price on the expiration date is $125, the trader's profit is $15.00. Which of the following is correct? a. Statement I and II are incorrect, Statement III and IV are correct. b. Statement is incorrect, Statement II, III and IV are correct Oc Statement I and Ill are incorrect, Statement II and IV are correct