Question
You own a call option on Intuit stock with a strike price of $42. When you purchased the option, it cost $5. The option will
You own a call option on Intuit stock with a strike price of $42. When you purchased the option, it cost $5. The option will expire in exactly three months' time.
a. If the stock is trading at $61 in three months, what will be the payoff of the call? What will be the profit of the call?
b. If the stock is trading at $39 in three months, what will be the payoff of the call? What will be the profit of the call?
c. Draw a payoff diagram showing the value of the call at expiration as a function of the stock price at expiration.
d. Redo c, but instead of showing payoffs, show profits.
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