Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Basic Option Strategies Profit Computation Assume the below prices for calls and puts: Call Put Strike Jul Aug Oct Jul Aug Oct 165 2.7 5.25

Basic Option Strategies Profit Computation

Assume the below prices for calls and puts:

Call

Put

Strike

Jul

Aug

Oct

Jul

Aug

Oct

165

2.7

5.25

8.1

2.4

4.75

6.75

170

0.8

3.25

6

5.75

7.5

9

  1. Buy one August 170 put contract. Hold it until expiration. Identify the breakeven stock price at expiration. What is the profit/loss if ST=190?
  2. Buy one October 165 call contract. Hold it until the options expire. Identify the breakeven stock price at expiration. What is the Maximum possible loss from the transaction? What is the profit/loss if ST=185
  3. Buy 100 shares of stocks and buy one August 165 put contract. Hold the position until expiration. Determine the breakeven stock price at expiration, the maximum profit and the maximum loss. What is the profit/loss if ST=150.
  4. Buy 100 shares of stock and write one October 170 call contract. Hold the position until expiration. Determine the breakeven stock price at expiration, the maximum profit and the maximum loss. What is the profit/loss if ST=185.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions