Question
You form a collar by buying a put with an exercise price of X1 = $37 and a premium of P = $3, and selling
You form a collar by buying a put with an exercise price of X1 = $37 and a premium of P = $3, and selling a call with an exercise price of X2 = $87 and a premium of C = $4. Both options mature in 8 months, and both have the same underlying asset. In addition, you buy the underlying asset for its current spot price of S = $68. Find the profit of this collar at expiration if the ending price of the underlying asset is ST = $60. Do NOT use the $ symbol in your answer; just write a numerical value. Of course, include the negative sign if the answer is negative; but do not include the positive sign if the answer is positive. | |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started