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How to calculate the payoff

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yodadmg | 23:10 Sun 03rd May 2009 | Business & Finance
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The price of Citigroup in the market is $3.17, and the price of call option that expires a year from now at the strike price of $5 is $1. Calculate the payoff of this option if the stock price of Citigroup next year is
� $8
� $4
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Avatar Image factor-fiction
Err, no thanks.
23:19 Sun 03rd May 2009
Avatar Image CovKid
At $8, payoff is $8 - $5 -$1, (Price at call less strike less premium...you make $2)

At $4 walk away from it....zero.

The Current price ($3.17) is irrelevant.
12:18 Tue 05th May 2009

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