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Suppose a call option on a given stock has premium $5 per share, and the put option at the same exercise price (E=$100) has premium
Suppose a call option on a given stock has premium $5 per share, and the put option at the same exercise price (E=$100) has premium $3 per share. The price of a Treasury security having the same maturity as the options is .9900 (dollars per face). a. What would you expect the price of the underlying security to be? b. Illustrate with a graph trhe profit or payoff profile that would result from a covered call (write call on the security you own) on this stock. Explain.
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