construct a bear money spread using october 165 and 170 calls. Hold the position until the option expires. determine the profits and graph the results. identify the breakeven stock price at expiration and the maximum and minimum profits.

profit profile pro One way to create a bear spread positions is purchasing a high strike put option and selling a imat low strike put option. Identify a strategy with call 8. Con options that creates a similar bear spread-shaped use profit profile. call cost. The following option prices were observed for calls and puts on a stock on July 6 of a particular year. stock Use this information for problems 6 through 24. The and u stock was priced at 165.13. The expirations are July stock 17, August 21, and October 16. The continuously compounded risk-free rates associated with the three 9. Suppo expirations are 0.0503, 0.0535, and 0.0571, respec- substa tively. The standard deviation is 0.21. consid approp Calls Puts 165, ar tion. D Strike Jul Aug Oct Jul Aug Oct Identifi 160 6.00 8.10 11.10 maxim 0.75 2.75 4.50 10. Constru 165 2.70 5.25 8.10 2.40 4.75 6.75 October 170 0.80 3.25 6.00 5.75 7.50 9.00 tility. C For problems 6 through 10 and 13 through 16, spreads determine the profits for the holding period indi- prices o cated for possible stock prices of 150, 155, 160, 165, estimat 170, 175, and 180 at the end of the holding period. the brea Answer any other questions as indicated. Note: Your 11. Using th Excel spreadsheet Stratlyz9e.xls will be useful here and grap for obtaining graphs as requested, but it does not call on th allow you to calculate the profits for several user- 15, Augu specified asset prices. It lets you specify one asset October price and a maximum and minimum. Use constant. Stratlyz9e.xls to produce the graph for the range of the from 150 to 180, but determine the profits for prices prices of 150, 155, 180 by hand for positions in all of 12. Consider the Augus held to expiration. For positions closed prior to October expiration, use the spreadsheet BSMbin9exls to determine the option price when the position is would ha closed then calculate the profit by hand Discuss 13. Construct