A speculator buys a call option for $3, with an exercise price of $50. The stock is currently priced at $49, and rises to $55 on the expiration date. What is the stock price at which the speculator would break even?Select one:a. $52b. $49c. $53d. $50e. $58
Question
A speculator buys a call option for 50. The stock is currently priced at 55 on the expiration date. What is the stock price at which the speculator would break even?Select one:a. 49c. 50e. $58
Solution
The speculator would break even when the stock price is 3 and the exercise price is 53 (3). The speculator would start making profit when the stock price exceeds 53.
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