Chapter 02 · Section 2.1

Vertical axis on the profit/loss diagram

On the profit/loss diagram, the vertical axis represents:

a) the price of the underlying asset at the time the option is purchased.
• b) the exercise price.
  No. The exercise certainly has an influence, but there is little use reserving an axis for it because it does not vary. Furthermore, the exercise price cannot be negative.
  c) the closing price of the option.
  d) the option holder's profit or loss.
  e) the option writer's profit or loss.
  f) None of the above.

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