Question
You wish to construct a protective collar on the Astra Zeneca Corporation (AZN) stock (1 long stock of AZN, 1 long put, 1 short call).
You wish to construct a protective collar on the Astra Zeneca Corporation (AZN) stock (1 long stock of AZN, 1 long put, 1 short call). You own 100 shares of the stock. The AZN stock currently trades for $55 per share. You buy 100 put options on this stock with the strike price of $50 and sells 100 call options with the strike price of $60. Both options expire in 6 months. The annual volatility of returns on AZN is 23%. The risk free rate is 2% per annum.
- Construct a payoff table for this strategy
- Show on the graph how the payoff of this strategy depends on the price of the AZN stock
- In your opinion, what is the purpose of this strategy?
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
