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( 1 6 points ) Special Agent Dale Cooper is evaluating option strategies that will allow him to profit from large moves in a stock's
points Special Agent Dale Cooper is evaluating option strategies that will allow him to profit from large moves in a stock's price, either up or down. He believes that a combination of long put options and long call option with the same expiration and exercise price would be his objective. TWPK stock is currently trading at $ per share. A six month call option on TWPK stock with an exercise price of $ is currently trading at $ The semiannual sixmonth risk free rate of interest is
a What is the price of one six month put option on TWPK stock with an exercise price of $
b In the space below, draw the payoff and the profit to this strategy on the same graph. Label the payoff line, the profit line, the axes, the exercise price with a dollar amount and the point where the payoff intersects the vertical axis with a dollar amount
c Calculate the dollar amounts of the following in the space below and label on the above graph:
i Maximum loss
ii Breakeven stock prices of the position
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