Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please solve the image question The following diagram depicts the net payoff to someone who enters a shortcall option position. They receive the option premium

image text in transcribed

please solve the image question

image text in transcribed
The following diagram depicts the net payoff to someone who enters a shortcall option position. They receive the option premium of $3 but are exposed to the potential of severe losses if share price rises sharply. Net Payoff Share Price Which of the following best explains why a trader would enter a short call option position like this? Select one: After receiving the $3 premium, they can "sell to close" and avoid the severe exposure. 0 The trader is expecting share price to be below the $48 breakeven point. 0 Every option trade must have two counterparties. The ASX determines which party has the long position and which party has the short position. 0 If share price rises, the trader can simply choose to not exercise the option. Clear my choice

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

Step: 3

blur-text-image

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

Exchange Rates and International Finance

Authors: Laurence Copeland

6th edition

273786040, 978-0273786047

More Books

Students also viewed these Finance questions

Question

What behaviors do leaders exhibit that non-leaders do not?

Answered: 1 week ago