Draw the profit/loss diagram at expiration for a long position in a call option with an exercise price of $100. Assume that the call costs $10 when you purchase it. (Hint: recall that “profit or loss” is the vertical axis and “stock price” is the horizontal axis.) Give numerical values for the points on the profit/loss line that intersect the vertical and horizontal axis and also label the exercise price on the horizontal axis.
B) If the stock price at expiration is $150, what is the likely value of the call option?
C) What is the maximum loss an investor would face on the call?
D) What is the maximum gain?