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You enter into the following option positions with firm ABC Inc, which expire in one year: (i) Buy a call option with an exercise price
You enter into the following option positions with firm ABC Inc, which expire in one year: (i) Buy a call option with an exercise price of $50. The premium is $5. (ii) Sel a put option with an exercise price of $50. The premium is $10.
Required: You purchase one call and you purchase one put option (with strike price $50). Pick the right gross payoffpicture belowfrom this new portfolio.
Payoff Diagram Choice A 150 100 50 Gross Payoff at Expiration 0 0 50 100 150 Value of Stock at Expiration Payoff Diagram Choice B 150 100 Gross Payoff at Expiration 0 50 100 150 -50 Value of Stock at Expiration Payoff Diagram Choice C 150 100 Gross Payoff at Expiration 50 0 50 100 150 -50 Value of Stock at Expiration Payoff Diagram Choice D 150 100 Gross Payoff at Expiration 0 50 100 150 -50 Value of Stock at Expiration Payoff Diagram Choice E 150 100 Gross Payoff at Expiration 0 50 100 150 -50 Value of Stock at Expiration
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