Question
Financial options An option trader considers the following strategy concerning the stock XYZ. The stock currently trades at $32. Option trader buys a call option
Financial options
An option trader considers the following strategy concerning the stock XYZ. The stock currently trades at $32. Option trader buys a call option with strike 30, pays premium of $3 per share, writes a call at strike 35, and collects $1 dollar. Please construct a figure that depicts the profit at expiration with different prices of the underlying stock XYZ. Could you also discuss, what are the expectations of the trader about the future price of the stock if this strategy is implemented?
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Managerial Accounting
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
13th Edition
978-0697789938
