5. Mr. Madoff wrote (sold) a call option on AMD stock with strike price $180 per...

5. Mr. Madoff wrote (sold) a call option on AMD stock with strike price $180 per share and received the premium of $1.10. Answer the following question and always think about who will decide whether to strike or not to strike.

A) Suppose AMD stock price is $160 before option expiration date. What would be Mr. Madoff’s profit/loss?

B) Suppose AMD stock price is $190 before option expiration date. What would be Mr. Madoff’s profit/loss?

C) At what stock price will Mr. Madoff breakeven?

D) Draw the relationship between Mr. Madoff’s profit/loss and AMD stock price by changing stock price from $170 to $190.

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jeff jeffy answered 1 year ago

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