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XYZ stock has been trading in a narrow range (+$5) around $250 for the past months, and you are convinced it is going to stay
XYZ stock has been trading in a narrow range (+$5) around $250 for the past months, and you are convinced it is going to stay in that range in the next 3 months. However, you expect that the stock price goes down twice as likely than goes up. The current price of the stock is $250 per share, and the price of a 3-month call and put at-the-money options are $3 and $5, respectively. What would be a simple options strategy using the at-the-money call and put options to exploit your conviction about the stock price's future movement? State a strategy and calculate the payoff and profit of the strategy. XYZ stock has been trading in a narrow range (+$5) around $250 for the past months, and you are convinced it is going to stay in that range in the next 3 months. However, you expect that the stock price goes down twice as likely than goes up. The current price of the stock is $250 per share, and the price of a 3-month call and put at-the-money options are $3 and $5, respectively. What would be a simple options strategy using the at-the-money call and put options to exploit your conviction about the stock price's future movement? State a strategy and calculate the payoff and profit of the strategy
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