Question
Your ethically sourced research indicates a stock (CaronaMeds Co) is about to release amazing new drug trials which show both safety and efficacy of its
Your ethically sourced research indicates a stock (CaronaMeds Co) is about to release amazing new drug trials which show both safety and efficacy of its new medical treatment for COVID 19. This will cause its stock price to jump from the last trade price of $2.50 to a much higher value, which you estimate to exceed $25 per share.
The following instruments are available to you:
Type Expiry Strike Price/
Stock $2.50
Call Dec20 $2.50 $2.00
Call Dec20 $10.00 $0.25
Put Dec20 $2.50 $2.00
Put Dec20 $0.50 $0.20
You decide on the following cost neutral strategy: Buy $10 Calls and go Short 10,000 shares.
What is the P&L of this strategy, if your research is correct and the stock jumps to $25 per share ?
State your answer in dollars, to the nearest dollar.
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