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An investor purchases a stock for $38 and a put for $0.50 with a strike price of $35. The investor sells a call for $0.50
An investor purchases a stock for $38 and a put for $0.50 with a strike price of $35. The investor sells a call for $0.50 with a strike price of $40. Complete the following table and determine the maximum profit and loss for this position? Draw the profit and loss diagram for this strategy as a function of the stock price at expiration.
Position | Today(0) | ST<35 | 35ST40 | 40 |
Buy 1 share | ||||
Write 1 call(X=$40) | ||||
Long 1 put(X=$35) | ||||
Total payoff | ||||
Total profit/loss | -- |
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