Question
If an investor buys a 12-month credit spread call option on Company XYZ's bond with a strike spread of 100bps for a premium of 35
If an investor buys a 12-month credit spread call option on Company XYZ's bond with a strike spread of 100bps for a premium of 35 bps, what is the appropriate course of action if XYZ's spread tightens to 60bps? Widens to 135bps? What is the breakeven level of the trade?
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Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
13th edition
132743469, 978-0132743464
