Question
The diagram below is a European call option on the stock with a strike price (K)= $80, initial cost=$10 and option life of 3 months.
The diagram below is a European call option on the stock with a strike price (K)= $80, initial cost=$10 and option life of 3 months. Explain in details whether the holder of this option will exercise his option and achieve net profit knowing that the profit is the final payoff minus the initial cost = - - premium, when: - 1- The market price of the underlying stock reaches ($75) at the maturity date of the option?
2- The market price of the underlying stock reaches ($110) at the maturity date of the option? 2- The market price of the underlying stock reaches ($110) at the maturity date of the option?
30 20 Profit ($) 10 1 1 1 50 60 70 80 90 100 110 -10Step by Step Solution
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