Question
Because understanding trading options can increase leverage and potential profit, a Malaysian investor on the Kuala Lumpur Stock Exchange (KLSE) is consider buying options instead
Because understanding trading options can increase leverage and potential profit, a Malaysian investor on the Kuala Lumpur Stock Exchange (KLSE) is consider buying options instead of trading directly in stocks. A a put with an exercise price of 40 MYR (Malaysia Ringgit) is offered at 4 MYR, while a call with a term equal to the exercise price of 45 MYR is worth 3 MYR. Interest rate stable at 6 percent per annum and the option maturity is 6 months. You are asked to calculate and describe the profit if the investor took short position (sell) in both options above (one put and one call).
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