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An investor bought 100 shares of IBM at $150 each and sold 3-month call options on 100 shares of IBM at a strike price of
An investor bought 100 shares of IBM at $150 each and sold 3-month call options on 100 shares of IBM at a strike price of $160. She received a premium of $2,000. Draw the payoff diagram for this position when the call option expires for IBM stock prices ranging from 130 to 170 in increments of $5. What might be the logic for this transaction?
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Step: 1
When the call option expires the investor will have the following payoff ...
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Financial Markets And Institutions
Authors: Frederic S. Mishkin, Stanley G. Eakins
7th Edition
013213683X, 978-0132136839
