Question
An investor is planning to sell 8 hundred shares of JKL stock in one month. The stock is currently trading at 191.43. Call options with
An investor is planning to sell 8 hundred shares of JKL stock in one month. The stock is currently trading at 191.43. Call options with strike price $235 are available with premium $5.3. Put options with strike price $172 are available with premium $5.72. Expiration of the options matches the exact point in time at which the investor will sell the shares. The investor hedges the anticipated stock sale by utilizing the appropriate range-forward hedge with the appropriate number and position in the call and put contracts described above. What is the investor's total cashflow associated with the sale of stock if the stock price is 190.95 in one month? Your total cashflow answer should include the purchase of stock and any/every cashflow associated with the range-forward hedge.
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