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Option Payoff & Profit/Loss Todays spot exchange rate is 1=$1.4870. Consider the following call option on euro, 147 December Euro which is selling at 0.85

Option Payoff & Profit/Loss

Todays spot exchange rate is 1=$1.4870. Consider the following call option on euro, 147 December Euro which is selling at 0.85 per . For a trader who has a long position on the call option, answer the following questions.

(1) Determine the payoff and profit/loss if today is the expiration date

(2) Draw and indicate CLEARLY the option payoff line and profit/loss line for the call option holder and indicate CLEARLY the following information and the values on the graph, (a) The break-even spot rate for the call option; (b) The maximum loss for the call holder if the option is not exercise at expiration; (c) The spot price that makes the call option at-the-money.

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