Question
Consider the following options portfolio: Today: June Expiration date: IBM June 72 call @ 2.50 IBM June 72 call @ .25 IBM June 70 put
Consider the following options portfolio: Today: June Expiration date: IBM June 72 call @ 2.50 IBM June 72 call @ .25 IBM June 70 put @ 4 IBM June 70 put @ 4.75 a. Today, you decide to buy 2 calls and sell 5 puts at the prices stated in the above table. What are your net option proceeds? b. What is the profit/loss on the position stated in part a above if IBM is selling at $71 on the expiration date? c. What is the profit/loss on this position if IBM is selling at $65 on the expiration date? d. At maturity to avoid any potential assignments, you will close out any open option positions. What is the profit/loss on the position stated in part a above if you execute closing option orders on expiration day when IBM is selling at $65? e. At what two stock prices will you just break even on your investment?
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