Dan bought an option contract on BHP shares with an exercise price of $50 and an expiry
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Question:
Dan 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.
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.
ii. At what minimum share price will the option buyer exercise the option on the expiration date? Provide reasoning in your answer.
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
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