Ignore original cost of option for payment calcucation

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Reference no: EM131183237

Intuition, explanation and formula would be nice

1) You own a call option on a stock and the strike price of the option is $30. The option has 3 weeks until expiration and the stock is currently priced at $35 per share. You paid $1 per put option and you bought 1 put option. What is the largest payout possible for this call option? Ignore the original cost of the option for the payment calculation.

2) Based on the information on the previous question, graph a net payoff diagram for one of the call options you purchased. Be sure to label clearly including the break-even point.

3) You sold a call option on a stock and the strike price of the option is $30. The option has 3 weeks until expiration and the stock is currently priced at $35 per share. You originally sold the call option for $3. What is the largest payout possible for this call option?

Reference no: EM131183237

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