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Gilead Pharmaceuticals (GILD) is trading at $100 per share. A June $105 call is trading at $1.80. A June $95 put is trading at $1.60.
Gilead Pharmaceuticals (GILD) is trading at $100 per share. A June $105 call is trading at $1.80. A June $95 put is trading at $1.60. I buy 100 shares of GILD but am worried about price fluctuations so I sell (short) a June $105 call and buy (long) a June $95 put.
a. What type of strategy is this?
b. Create a payoff matrix to evaluate prices of $90, $100 and $108. Keep in mind the options contracts are for 100 shares each.
c. Calculate the maximum losses and gains from the strategy.
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