Breakeven for a 3 dollar call struck at 4

Question

You pay $3 for a call option with a strike of $4. At what stock price at expiry do you exactly break even?

$7. At expiry the call is worth $S_T-4$ once it is in the money, and you need that to recover the $3 premium, so $S_T=4+3=7$ .

Adapted from QuantQuestions.io; question and answer rewritten by SelfMadeQuant.com.

See the hint and the full worked solution in the question bank (free account).

Start with a free lesson: Options is part of a free topic. Create a free account, no card needed, to read it in full with worked solutions.