Answer:
Payoff = $8.5
Profit = $4.5
Explanation:
from the question
Stock price = $38.5
strike price = $30
premium per share (price paid for the option) = $4
Call payoff per share on a long position, which is calculated as every $1 above the strike price
= MAX (Stock price - strike price, 0)
= (38.5 - 30)
= $8.5
Call profit on a long position
= Payoff - Initial investment
= (MAX (Stock price - strike price, 0) - premium per share)
= (38.5 - 30) - 4
= 8.5 - 4
= $4.5
