Question

Shares in Rogers trade for $46.12. Call options with a $45 strike price are selling for $4.80 and put options with the same strike price are selling for $2.45. What is the break-even prices for long positions in the call and put option respectively?

Answer 1

The break-even price for a long position in the call option is $49.80, and the break-even price for a long position in the put option is $42.55.

Step-by-step explanation:

The break-even price for a long position in the call option can be calculated by adding the strike price to the premium paid for the option. In this case, the strike price is $45 and the premium for the call option is $4.80, so the break-even price for the call option is $45 + $4.80 = $49.80.

The break-even price for a long position in the put option can be calculated by subtracting the premium paid for the option from the strike price. In this case, the strike price is $45 and the premium for the put option is $2.45, so the break-even price for the put option is $45 - $2.45 = $42.55.