Question
1.Chapter 20] Consider the following options portfolio. You write a January expiration call option on IBM with exercise price 130 and premium of $2.18. You
1.Chapter 20] Consider the following options portfolio. You write a January expiration call option on IBM with exercise price 130 and premium of $2.18. You write a January IBM put option with exercise price 125 and premium of $2.44.
a.Graph the payoff of this portfolio at option expiration as a function of IBM's stock price at that time.
b.What will be the profit/loss on this position if IBM is selling at 128 on the option expiration date? What if IBM is selling at 135?
c.At what two stock prices will you just break even on your investment?
d.What kind of "bet" is this investor making; that is, what must this investor believe about IBM's stock price to justify this position?
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Contemporary Business Mathematics with Canadian Applications
Authors: S. A. Hummelbrunner, Kelly Halliday, Ali R. Hassanlou, K. Suzanne Coombs
11th edition
134141083, 978-0134141084
