Question
In: Finance
An option on IBM has an exercise price of $160 and is selling for $8.00. IBM’s...
An option on IBM has an exercise price of $160 and is selling for $8.00. IBM’s stock is currently selling for $165. Graph the payoff and profit/loss line for an individual who bought this call option. Label the axis and show the break-even point.
Solutions
Expert Solution
X = $160
C = $8
Long call payoff = max(St - X, 0)
Long call payoff = max(St - 160, 0)
Long call profit = Long call payoff - C
Long call profit = max(St - 160, 0) - 8
Breakeven point = Strike Price + C
Breakeven point = 160 + 8 = $168
jeff jeffy answered 1 year agoRelated Solutions
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