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You take a speculative position in two options. You sell a call option and you sell a put option on firm ABC. The call option
You take a speculative position in two options. You sell a call option and you sell a put option on firm ABC. The call option has a strike price of $50 and you receive a premium of $4. The put option also has a strike price of $50 and you receive a premium of $4. Both options expire at the same time in three months from now. 20. You are betting that the stock price of ABC : A) Will remain fairly constant B) Will increase by a large amount C) Will decrease by a large amount D) Will move by a large amount in either direction 21. What is your maximum possible profit? A) Unlimited B) $50 C) $42 D) $58 E) $8 22. Assume at expiration that ABC 's stock price equals $40. Your profit or loss equals: A) A loss of $8 B) A loss of $4 C) A loss of $2 D) A profit of $2 E) A profit of $8
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