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.
(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.
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(b) What are the maximum gain and loss of your position as described in (i)?
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(c) What is the breakeven price of your position as described in (i)?
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Personal Finance
Authors: Jack Kapoor
13th Edition
1260799735, 9781260799736
