Chapter 02 · Section 2.1
The horizontal axis on the profit/loss diagram
On the profit/loss diagram, the horizontal axis represents:
a) the price of the underlying asset at the time the option is purchased.
b) the price of the underlying asset at time of expiration/exercise.
c) time until expiration.
d) the option premium.
e) None of the above.
For which one of the above variables can you reasonably say that it has a direct relationship with the profit/loss on the transaction?