Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

JUST answer the Q19 a b QUESTION 18 A call option on Santos Limited shares with an exercise price of $7.25 per share, expiry in

image text in transcribedimage text in transcribedimage text in transcribed

JUST answer the Q19 a b

QUESTION 18 A call option on Santos Limited shares with an exercise price of $7.25 per share, expiry in two months, is currently trading at $0.70. The put option with the same exercise price and date is trading at $0.95. Draw a fully labeled diagram of the long call and short call positions. Indicate the areas in which either option is in the money". Upload a picture or pdf of your diagram. Attach File Browse My Computer QUESTION 19 Continue from previous question: A call option on Santos Limited shares with an exercise price of $7.25 per share, expiry in two months, is currently trading at $0.70. The put option with the same exercise price and date is trading at $0.95. a. Your friend is very excited. He found an easy way to get rich: "Long a put and a call with the same strike price and one of them will always be in the money!!!!" You can use your pay-off diagram(s) to explain the error in his plan. b. Beyond which share prices does your friend's strategy become profitable? (Remember: He paid for BOTH options) T T T F Paragraph Arial % DO 90 E fx Mashups - 16 3 (12pt) != - E - T- T T Os T 1 - - - H D HTML CSS B Path:p Words:0 LONG CALL Profit Unlimited $7075 profit 2+ too a toir + x 1 I max. coss struke price SHORT CALL " breakenen point - 2 4 6 l stike price Unlimited loss

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

Aircraft Finance Strategies For Managing Capital Costs In A Turbulent Industry

Authors: Bijan Vasigh, Reza Taleghani, Darryl Jenkins

1st Edition

1604270713, 9781604270716

More Books

Students also viewed these Finance questions

Question

3. Describe the process of a union drive and election.

Answered: 1 week ago

Question

2. What appeals processes are open to this person?

Answered: 1 week ago