Example Amy sells Bob a 3-month European call option on one share of XYZ stock Suppose XYZ stock is trading at 32.5 Exercise price = 35 Premium = 3 At expiration (time T), suppose: S T =30S T =40 Total payoff [profit/loss] Amy:0 [ 3]-5 [-2] Bob:0 [-3] 5 [ 2]
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