Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

In December, you believe that OPK Company, which is currently trading at $125 per share, will drop to $110 per share or less over the

In December, you believe that OPK Company, which is currently trading at $125 per share, will drop to $110 per share or less over the next month or two. You sell 20 OPK January $128 Calls for a premium of $5.00. At the same time you buy 20 OPK January $135 Calls at a premium of $1.25 (sell January calls with a strike of $128 and $5.00 premium and buy 20 January Calls with a strike of $135 and premium of $1.25). Determine your gain or loss if:

  1. the stock price decreases to $110 per share at expiration
  2. the stock price decreases to $100 per share at expiration
  3. the stock price increases to $127 per share at expiration
  4. the stock price increases to $150 per share at expiration
  5. the stock price increases to $133 per share at expiration
  6. the stock price decreases to $131.75 per share at expiration

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Futures And Options Markets

Authors: Jonn C. Hull

8th International Edition

0133382850, 9780133382853

More Books

Students also viewed these Finance questions

Question

Fixed dollar match: 75 cents per each $1 employee contribution.

Answered: 1 week ago