Lew paid $300 to purchase a call on XYZ with a strike price of $25. What does the market price of XYZ have to be for Lew to break- even on his option investment? Ignore transaction costs and taxes.

Question

Quizplus · Accepted Answer

To break even, the market price of XYZ must be equal to the strike price plus the premium paid for the call. Therefore, $25 (strike price) + $3 (premium per share, since $300 for 100 shares) = $28.

Lew Paid $300 to Purchase a Call on XYZ with a Strike