Question
Read the following excerpt and draw a profit diagram based on the option positions. Show all the critical points on the diagram. For example, the
Read the following excerpt and draw a profit diagram based on the option positions. Show all the critical points on the diagram. For example, the intercepts on axes, maximum profit or maximum loss.
Iron ore producer, Impala, experienced a more than 2.5% rally in shares during the trading session to arrive at a new 52-week high of $29.64. A bullish risk reversal in the March 2010 contract today indicates at least one investor is positioning for continued upward movement in the price of Impala shares by expiration. The trader sold approximately 3,300 puts at the March $26 strike for an average premium of $1.29 apiece in order to finance the purchase of roughly 3,300 calls at the higher March $32 strike for $1.59 each.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started