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.
• c) the closing price of the option.
  No. No. If you are long or short an option, the closing price of the option is only relevant to you if you want to resell/rebuy it. The standard profit/loss diagrams assumes you keep the position.
  d) the option holder's profit or loss.
  e) the option writer's profit or loss.
  f) None of the above.

(Click here for help)