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I am unsure how to answer the break even point in question d 5. You purchase a call option with a $60 strike price and
I am unsure how to answer the break even point in question d
5. You purchase a call option with a $60 strike price and write a call option on the same stock with a $50 strike price. The two options have the same expiration date. One of the calls sells for $3, while the other sells for $9. a. Which call sells for $3 and which sells for $9? Explain. Remember that all else equal, the price of a call option is decreasing in the strike price. Thus, the $60 strike price call option sells for $3 and the $50 strike price call option sells for $9. b. Draw the payoff of this strategy at the option expiration date. C. Draw the profit of this strategy at the option expiration date. d. What is the break-even point for this strategy? Is the investor bullish or bearish on the stockStep by Step Solution
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