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?

Question

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? ​

Quizplus · Accepted Answer

The break-even point for a call option is calculated by adding the premium paid for the option ($3) to the exercise price ($50). Therefore, the break-even stock price is $53.

A Speculator Buys a Call Option for $3, with an Exercise