Consider the following option portfolio: You write a January 2012 expiration call option on IBM with exercise price $172, and the price of the call option is $8.93. You also write a January expiration IBM put option with exercise price $167, the price of the put option is $10.85.

A)What will be the profit/loss on this position if IBM is selling at $161 on the option expiration date?

B) What will be the profit/loss on this position if IBM is selling at $180 on the option expiration date?

C) At what stock price will you just break even on your investment (i.e., zero net profit)?

For the put, this requires that:

D) At what stock price will you just break even on your investment (i.e., zero net profit)?

For the call, this requires that:

E) What kind of bet is this investor making; that is, what must this investor believe about IBMs stock price in order to justify the position?

Group of answer choices

betting that the IBM stock price will go down.

betting that the IBM stock price will go up.

betting that the IBM stock price will have high volatility.

betting that the IBM stock price will have low volatility.