Answered step by step
Verified Expert Solution
Question
1 Approved Answer
can you please do all of the parts John has been following the stock market very closely over the past 18 months and has a
can you please do all of the parts John has been following the stock market very closely over the past 18 months and has a strong belief that future stock prices will be significanty higher. He has two alternatives that he can follow. The first is to use a long-term strategy-purchase the stock today and sell in sometime in the future at a pessibly higher price. The other altemative is to buy a thee-month call option. The relevant information needed to analyze these altematives is presented below: Current stock price =$49 Desires to buy one round lot =100 shares Three-month cal option has a strike price of $51 and a call premium of $1. a. In scenario one, if the stock price three months from now is $60 : 1. What is the long-position profit or loss? 2. What is the breakeven point of the call option? 3. Is the option in or cut of the money? 4. What is the option proei: or loss? b. In scenario two, if the stock price three months from now is $42 : 1. What is the long-position profit of loss? 2. What is the breakeven peint of the call option? 3. Is the option in or out of the money? 4. What is the option proti or loss? a1. If the stock price three months from now is $60, the long-position peofit (or loss) is $ (Round to the nearest dollar. Enter as a positive number for profit and a negative number for a loss.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started