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A stock is trading at $100. A call option with strike $102 is trading at $2.21, while another call option, with strike $105, is trading
A stock is trading at $100. A call option with strike $102 is trading at $2.21, while another call option, with strike $105, is trading at S1.23. Both options mature in one month's time. You (a) If you buy call options with strike price $105, sketch your payoff, along with your profit. (b) If you buy call options with strike price $102, sketch your payoff, along with your profit. (c) If you use the two options to construct a bull spread, sketch your payoff, along with your (d) If the stock price in one month's time is S1/12, for which values of S1/12 is strategy A have $1 million to invest, and want to speculate that the stock price goes up This is strategy "A". This is strategy "B". profit. This is strategy "C the best, for which values of S1/12 is strategy B the best, and for which values of S1/12 is strategy C the best
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