Options · Question 11 of 12
An investor buys a call with a strike price of 100 euros for a premium of 5 euros (ratio 1). On the expiry date, the share stands at 112 euros. Which statements are correct?
2 answers are correct. Hard
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Answer
- A The profit is 7 euros per option
- D The break-even point on the expiry date is 105 euros
Explanation
At expiry, the call is worth 112 − 100 = 12 euros; minus the 5 euros paid, 7 euros remain. Only from 105 euros does the intrinsic value cover the premium. If the share were below 100 euros, the call would expire worthless and the 5 euros would be lost.