Suppose a financial manager buys call options on 50,000 barrels of oil with an exercise price of

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Suppose a financial manager buys call options on 50,000 barrels of oil with an exercise price of $25 per barrel. She simultaneously sells a put option on 50,000 barrels of oil with the same exercise price of $25 per barrel. Consider her gains and losses if oil prices are $20, $22, $25, $28, and $30. What do you notice about the payoff profile?

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Fundamentals Of Corporate Finance

ISBN: 9780072553079

6th Edition

Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan

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