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A trader shorts one share of a stock index for 50 and buys a 60-strike European call option on that stock that expires in 2
A trader shorts one share of a stock index for 50 and buys a 60-strike European call option on that stock that expires in 2 years for 10. Assume the annual effective interest rate is 3%. The stock index increases to 75 after 2 years. Calculate the profit on your combined position, and determine an alternative name for this combined position. Possible Answers A Floor with profit of 22.64 B Floor with profit of 17.56 c Cap with profit of -22.64 D Cap with profit of 17.56 E Written Covered Call with profit of 22.64
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