Question
5. Today a company stock is trading for $60 a share. You are confident that the stock price of the company will experience change in
5. Today a company stock is trading for $60 a share. You are confident that the stock price of the company will experience change in value of over 30% relative to current price in either upward or downward direction over the course of next year. Today you decide to transact in either one or two at the money American options on XYZ stock maturing in one year. The strike price of both options is $60 a share. The call option premium is $6 and put option premium is $5. Given this information and your belief, you should _______.
a. Buy 2 calls.
b. Buy 1 call and Sell 1 put.
c. Sell 1 call and Sell 1 put.
d. Buy 1 call and Buy 1 put.
e. Sell 2 puts.
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