A one-year European call option on a stock with a strike price of $30 costs $3; a one-year European put option written on the same stock with a strike price of $30 costs $4. Suppose that a trader buys two call options and one put option. The breakeven stock price below which the trader makes a profit is ______. A: 40 B: 20 C: 25 D:35

A one-year European call option on a stock with a strike price of $30 costs $3; a one-year European put option written on the same stock with a strike price of $30 costs $4. Suppose that a trader buys two call options and one put option. The breakeven stock price below which the trader makes a profit is ______. A: 40 B: 20 C: 25 D:35

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 3MC: Consider Triple Play’s call option with a $25 strike price. The following table contains historical...

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Suppose that a European call option to buy a share for $100.00 costs $5.00 and is held untilmaturity. Under what circumstances will the holder of the option make a profit? Underwhat circumstances will the option be exercised? Draw a diagram illustrating how the profitfrom a long position in the option depends on the stock price at maturity of the option. Suppose that a European put option to sell a share for $60 costs $8 and is held untilmaturity. Under what circumstances will the seller of the option (the party with the shortposition) make a profit? Under what circumstances will the option be exercised? Draw adiagram illustrating how the profit from a short position in the option depends on thestock price at maturity of the option.
A one-year call option on a stock with a strike price of $30 costs $3; a one-year put option on the sto of $30 costs $4. Suppose that a trader buys two call options and one put option. The breakeven sto the trader makes a profit is A) $28 B $20 C) $26 D $25
Assume that the current price of a stock is S0 = 100. An investor holds long one European put option with a strike price of K = 100 and short one European call option with strike K = 105. Both options mature at the same time T. Assume that the stock price at maturity is ST = 102. What is the payoff to the investor? Select one: a. 2 b. 1 c. 0 d. -1 e. -2 f. None of the above
A one-year call option on a stock with strike price of $90 costs $6 and a one-year put option on the same stock with strike price of $90 costs $7. Suppose that a trader buys one call option and one put option. a. What is the breakeven stock price, above which the trader makes a profit? b. What is the breakeven stock price, below which the trader makes a profit?
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