The following options prices were observed for calls and puts on Lannister Ltd for the

trading day of July 6 2019. Use this information in Questions 3-8. The stock was priced at

$163.37. The expirations were July 17, August 21 and October 16. The continuously

compounded risk-free rates associated with the three expirations were 0.0517, 0.0542 and

0.0565, respectively. The options have European expiries.

Lannister Ltd CALLS Lannister Ltd PUTS

STRIKE JUL AUG OCT JUL AUG OCT

150 9.50 11.25 13.61 0.17 1.18 2.69

155 5.70 7.96 10.88 0.71 2.66 4.44

160 2.23 5.01 8.04 2.22 4.63 6.60

165 0.77 2.79 6.90 5.61 7.42 8.81

Construct an options strategy by going short one October 160 call and long one October 165

call using Lannister Ltd options. Hold the position until expiration. Determine the profits and

graph the results. Identify the strategy, breakeven stock price at expiration, the maximum

profit, and the maximum loss. Discuss any special considerations associated with this

strategy. Note: use the OptionStrategyAnalyzer10e.xlsm to obtain the required payoff

diagram.