You have $5000 to invest in either the call option or the underlying stock. Assum the stock price is $50 and the call option with an exercise price of $54 is selling for $1.
If you buy all stock and the stock price ends up at $40, what is your rate of return?
If you buy all call option and the stock price end at $40, what is your rate of return?
If you buy all stocks and the stock price end at $60, what is your rate of return?
If you buy all call option and the stock price end at $60, what is your rate of return?