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Please create a bull call spread using the following quotes Option type Exercise price Option premium Call on Stock ABC $17.50 S5.50 $20 $3.50 Required:
Please create a bull call spread using the following quotes Option type Exercise price Option premium Call on Stock ABC $17.50 S5.50 $20 $3.50 Required: (a) Explain how to create the bull spread by using the above options. Draw the profit and loss diagram of this strategy on the expiration date and complete the following table Profit/Loss and break-even points P/L & BE points When S $17.50 When S $20 BE point- Strategy P L= (4 marks) (b) Now sell another call on ABC with strike price of $20 (Now you have "CALL RATIO SPREAD"!). Draw the profit and loss diagram of the updated strategy on the expiration date and complete the following table Profit/Loss and break-even points P/L & BE points When S $17.50 When S2S 20 BE point- Strategy P L=
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