f the January XYZ Corp. 59 call is selling for $1.25, and the January XYZ Corp. 60 call is selling for $.75, construct a bear spread using these January 59 and 60 calls.

1a.Construct a table like the one below, showing profit and loss if the options expire when the stock price is $0, $58, $59, $60, $61, $65, and $70, for each part of the spread, and the net profit or loss for the entire spread position.

1b.Draw a hockey stick diagram for the spread, clearly labeling all the critical points.

Stock Price at Option Expiration

0

600

605

610

615

620

630

Short GOOG 600 call @ 10

+10

+10

+5

0

-5

-10

-20

Long GOOG 610 call @ 5

-5

-5

-5

-5

0

+5

+15

Net Profit/Loss from Position

+5

+5

0

-5

-5

-5

-5