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The shareprice of Company stock currently is $25.00. Due to a pending court case, there is a lot of uncertainty about the Company and, consequently,
The shareprice of Company stock currently is $25.00. Due to a pending court case, there is a lot of uncertainty about the Company and, consequently, you believe the shareprice might either rise a lot or fall a lot. You do not buy the share. Instead, you buy one call option that costs $0.60 and you buy one put option that costs $5.90 . For both options, the strike is 30. Which statement about the Company shareprice at expiry is true such that your overall rate of return from investment in the options is exactly zero? a. if the shareprice is $17.77 then profit on the call exactly offsets losses on the put b. if the shareprice is $20.43 then profit on the call exactly offsets losses on the put c. if the shareprice is $17.77 then profit on the put exactly offsets losses on the call d. if the shareprice is $23.50 then profit on the put exactly offsets losses on the call e. if the shareprice is $20.43 then profit on the put exactly offsets losses on the call
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