Assume it is June, 2010 and you are awaiting clarity on BP Assume it is June, 20

Question

Assume it is June, 2010 and you are awaiting clarity on BP

Assume it is June, 2010 and you are awaiting clarity on BP as fundamentals. As an investor, you are looking at options scenarios given the unpredictable oil spill crisis and associated firm specific risk (unsystematic risk). BP as closing price on June 8, 2010 was 34.67. Using the option prices shown below for the underlying security (BP), do the following: 1.) Focus on the October 2010 35 call. Suppose you bought this call at the price indicated. How high must BP as stock price rise to at expiration to break even on this option?

Explanation / Answer

BP Stock Purchase Price           =          $ 34.67

Call option October Strike 35 rate        =          4.35

Contract Size                            =          100 share

How high must BP

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