What price of stock at expiry will allow you to break even

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Reference no: EM132014430

At the Chicago Board of Options Trading, stock ABC is currently trading at $64, and 3 months ‘At the Money’ puts on this stock are trading at $3. If you buy one of these puts today and hold on to it until expiry

a) Explain with the help of a profit graph what price of the stock at expiry will allow you to break even?

b) What will be your maximum profit? Label the profit area in the graph.

c) What will be your maximum loss? Label the loss area in the graph.

d) Draw the profit graph for a call with same strike and expiry which is priced at $2.

Reference no: EM132014430

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