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Suppose that a court decision will have a major impact on a firms profits. If the court decision is favorable, you estimate that the firms
Suppose that a court decision will have a major impact on a firms profits. If the court decision is favorable, you estimate that the firms stock will be worth $100 per share. If the court ruling is unfavorable, you estimate that the stock will be worth only $60 per share. Currently, the price is $80 per share, as half the market participants are betting on each possibility. Is there any way to use options contracts to profit from this situation?
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