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Calculate the break-even amount for the call position

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Reference no: EM132913010

John bought an option contract on BHP shares with an exercise price of $50 and an expiry date in one month. The market price for BHP shares today is $47.81. The call price is trading at $0.35.

Problem i. Calculate the break-even amount for the call position and draw a fully labelled diagram for both buyer of the option and seller of the option.

Problem ii. At what minimum share price will the option buyer exercise the option on the expiration date? Provide reasoning in your answer.

Reference no: EM132913010

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