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4 . Johnson Mining Company ( JMC ) , primarily mines gold, and is currently trading at $ 5 4 . 5 5 / share
Johnson Mining Company JMC primarily mines gold, and is currently trading at $share The CEO of the company suddenly dies, and no one is sure what affect this will have on the company in the short term. Assume a annual interest rate. The following options are available. points
Spot Expiration Call Price Strike Price Put Price
$ Months $ $ $
$ Months $ $ $
$ Months $ $ $
a Describe exactly how you would create a bottom straddle using the above options, and what your initial cost per share would be for this position.
b Draw a profit diagram of your position. Clearly indicate all breakeven points, and intercepts.
c Describe exactly how you would create a bottom strangle using the above options, and what your initial cost per share would be for this position
d Draw a profit diagram of your position. Clearly indicate all breakeven points, and intercepts.
e The price barely changes and JMC is now $ What is your profit per share in each position above?
f What if instead the price moves to $ What is your profit per share in each position above?
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