If the price is $4 for a call option with strike of $30, what are the payoff and profit on a long position, if the option expires when the stock is $38.5

Payoff = $8.5

Profit = $4.5

Explanation:

from the question

Stock price = $38.5

strike price = $30

premium per share (price paid for the option) = $4

Call payoff per share on a long position, which is calculated as every $1 above the strike price

= MAX (Stock price - strike price, 0)

= (38.5 - 30)

= $8.5

Call profit on a long position

= Payoff - Initial investment

= (MAX (Stock price - strike price, 0) - premium per share)

= (38.5 - 30) - 4

= 8.5 - 4

= $4.5