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1. How does the strike price of a Call option work in relation to the price of the underlying? 2. Explain why in an option
1. How does the "strike price" of a Call option work in relation to the price of the underlying? 2. Explain why in an option that is "deep in-the-money," most of the premium is made up of intrinsic value. 3. You are evaluating the purchase of 10 DEF March 25 Call @ 3.20 (suppose each contract consists of 100 SHARES of DEF). Analyze the possible outcome of this strategy according to: A. Maximum loss B. Maximum gain C. Break-even point 4. You see apullback in Tesla Inc.'s price below $1,100 for the next three months and you're interested in profiting from that drop. TSLA is trading today at | $1,222 per share. A. What is the basic bearish strategy that allows you to participate in the magnitude of the fall? B. What is the basic bearish strategy that does not allow to participate in the magnitude of the fall? C. Calculate the maximum loss, maximum gain, and break-even point by assuming the basic strategy that allows you to participate in the magnitude of the fall. Suppose the option has a premium of $86 per share
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