Question
The current price of a stock is $70, and the one-month stock call option with a strike price of $68 currently sells for $3. An
The current price of a stock is $70, and the one-month stock call option with a strike price of $68 currently sells for $3. An investor who feels that the price of the stock will increase is trying to decide between buying shares and buying call options. Both strategies involve the same investment of $105,000. (a) If the stock price is (i)$65 or (ii)$75 in one month, what would be the profit or loss of the two strategies? Show the profit (loss) table for the two strategies under different market conditions (when stock price is $65 or $75). What advice would you give? (b) How high does the stock price have to rise for the option strategy to be more profitable?
Please give me the process, thank you!
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