Question
Consider the following two ratio spreads: Buy 950-strike call, sell two 1050-strike calls. Buy two 950-strike calls, sell three 1050-strike calls. A. Create the profit
Consider the following two ratio spreads:
Buy 950-strike call, sell two 1050-strike calls.
Buy two 950-strike calls, sell three 1050-strike calls.
A. Create the profit tables and graphs for the above ratio spreads.
B. What is the maximum loss for each of these positions?
C. What is the maximum profit for each of these positions?
D. What are the breakeven points for each of these positions?
1 year interest rate is 2% the PNR 1 year forwards price is $1020, and use these premiums for PNR options with 1 year to expiration.
| Strike | Call | Put |
| $950 | $120.405 | $51.777 |
| $1,000 | $93.809 | $74.201 |
| $1,020 | $84.470 | $84.470 |
| $1,050 | $71.802 | $101.214 |
| $1,107 | $51.873 | $137.167 |
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
Financial Trading And Investing
Authors: John Teall
3rd Edition
0323909558, 978-0323909556
