Question
You own a stock currently at $50. You buy a 6-month put option with a 45 strike for a price of 4. You sell a
You own a stock currently at $50.
You buy a 6-month put option with a 45 strike for a price of 4.
You sell a 6-month call option with a 60 strike for a price of 3.
Fill in the net profit table for the following stock prices at the end of 6 months.
Stock price in 6 months Net value
65
60
55
50
45
40
4.You can buy or sell calls and puts. Which option has unlimited upside? Which option has unlimited downside? Which option has a limited upside? Which option has a limited downside?
5.You need to buy oil in 3 months. How can you create an option position using puts and calls to limit your exposure to a change in oil prices?
6.You need to sell your Google stock in 6 months. How can you create an option position using puts and calls to limit your exposure to a change in stock price?
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