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

Buy 100 shares of Lannister Ltd at $163.37 and short one October 165 call. 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.