A strangle is created by buying a put and buying a call on the same stock with
Question:
A strangle is created by buying a put and buying a call on the same stock with a higher strike price and the same expiration. A put with a strike price of $100 sells for $6.75 and a call with a strike price of $110 sells for $8.60. Draw a graph showing the payoff and profit for a straddle using these options.
Strike PriceIn finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.
Step by Step Answer:
Total cost 860 675 1535 Stock price Long call payoff Long put payoff Total payoff Tota...View the full answer
Fundamentals of Investments, Valuation and Management
ISBN: 978-1259720697
8th edition
Authors: Bradford Jordan, Thomas Miller, Steve Dolvin
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Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
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