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.
d) the option holder's profit or loss.
e) the option writer's profit or loss.
f) None of the above.
Both axes represent a variable that is not certain yet, one as a function of the other.