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

Question

Quizplus · Accepted Answer

Lew needs the market price of Delta to be $28 to break-even, as he paid $300 for the call option, which is equivalent to $3 per share (since options typically cover 100 shares). Therefore, the break-even price is the strike price ($25) plus the premium paid per share ($3), totaling $28.

Lew Paid $300 to Purchase a Call on Delta Stock