Problem 1 Graph (Chpater 6: Options Strategies)

Total Profit / Loss — Options Strategy

Covered Call  •  Buy Price = 400  •  Call Premium = 30  •  BEP = 370

📉 LOSS ZONE

Stock Price (Sₜ)

150

Total Profit / Loss

-220

Call Premium Received

+30

Break-Even Point

370

Stock Price:

150

Drag:

At St = 150, the stock fell far below the buy price of 400. Loss on stock = 150 − 400 = −250. Call expires worthless, you keep the premium of +30. Total = −250 + 30 = −220.