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

question 2

Multiple Choice

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? ​

• A)$50
• B)$58
• C)$52
• D)$53
• E)$49

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Definitions:

Rebates

A partial refund to someone who has paid too much for tax, rent, or a utility, or a marketing strategy offering a discount on an initial purchase back after the fact.

Firms

Business organizations or entities that produce goods or provide services, ranging in size from single proprietorships to large corporations.

Cooperative Games

Cooperative games are strategic games where players can form binding agreements to cooperate and share the payoffs.

Bargaining

The process of negotiating the terms of an agreement or a deal between two or more parties.