Question
You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is $50
You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is $50 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes: A bull call spread is constructed by buying a call option with a low strike price, and writing another call option with a higher strike price for the same expiration date.
1. Ignoring commissions, the cost to establish the bull call spread with $45 and $50 strike prices would be _______.
A. $1,050
B. $650
C. $400
D. $400 income rather than cost
2. If in June the stock price is $53 your net profit on the bull call spread with $45 and $50 strike prices would be ________.
A. $300
B. -$400
C. $100
D. $50
Wildwood Corp Underlying Stock price: $50.00 Expiration June June June Strike 45.00 50.00 55.00 Call 8.50 4.50 2.00 Put 2.00 3.00 7.50 Wildwood Corp Underlying Stock price: $50.00 Expiration June June June Strike 45.00 50.00 55.00 Call 8.50 4.50 2.00 Put 2.00 3.00 7.50Step by Step Solution
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