Question
Suppose Stock D is currently selling for $100. Based on technical analysis, you believe that Stock D will be breaking far out of the range
Suppose Stock D is currently selling for $100. Based on technical analysis, you believe that Stock D will be breaking far out of the range in the coming few weeks.
| Underlying | Strike price | Premium | Expiry | ||
| Option E | Call | Stock D | $100 | $8 | 15 Jun 11 |
| Option F | Call | Stock D | $125 | $3 | 15 Jun 11 |
| Option G | Put | Stock D | $100 | $6 | 15 Jun 11 |
(a) Name and describe the investment strategy that you will pursue. Construct a net payoff Underlying Strike price Premium Expiry Option E Call Stock D $100 $8 15 Jun 11 Option F Call Stock D $125 $3 15 Jun 11 Option G Put Stock D $100 $6 15 Jun 11 (profit & loss) diagram of your position.
(b) What are the maximum gain and loss of your position as described in (i)?
(c) What is the breakeven price of your position as described in (i)?
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The Engineers Cost Handbook Tools For Managing Project Costs
Authors: Richard E. Westney
1st Edition
0824797965, 978-0824797966
