Question
8. Suppose that put options on a stock with strike prices $66 and $75 cost $3 and $5, respectively. a. How can the options be
8. Suppose that put options on a stock with strike prices $66 and $75 cost $3 and $5, respectively. a. How can the options be used to create (a) a bull spread and (b) a bear spread? b. For what range of future stock prices will the bear spread strategy be profitable. c. Is the profit for the bear spread strategy limited? If so, how much and at what price range? d. At what price range will you exercise the long position from the bear spread strategy? e. At what range of future stock prices will the bear spread strategy lead to a loss? f. What is the maximum loss that you can incur from bear spread strategy and at what price range?
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