Question
You acquired a piece of information (before your fellow traders) that company ABC is going to have a press release. You dont know what the
You acquired a piece of information (before your fellow traders) that company ABC is going to have a press release. You dont know what the news is or how the market will react, although you believe the companys stock will move as a result of the news release. Current stock price is $50. Six option series are traded: calls and puts with strike price $45, $50, and $55. How would you design a trading strategy using options on company ABCs stock given the information you acquired? Please explain. And specify what option positions you would take and show payoffs.
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