Solution :
2). Calculation of the P & L on the option at expiration if underlying price is $ 57. 50
As the underlying price is more than the exercise price, the option is exercised.
The initial cash flow = - $ 2.63
Cash flow at the expiration = $ 57.50 - $ 40
= $ 17.50
Therefore, profit = $ 17.50 - $ 2.63
= $ 15.07
1). The strike price or the exercise price = $ 40
Premium for call option = $ 2.63