Basic Option Strategies Profit Computation Assume the below prices for calls and puts: Call Put Strike Jul Aug Oct Jul Aug Oct 165 2.7 5.25 8.1 2.4 4.75 6.75 170 0.8 3.25 6 5.75 7.5 9. 1. Buy one August 170 call contract. Hold it until expiration. Identify the breakeven stock price at expiration. What is the profit/loss if ST=190? What is the maximum profit? 2. Buy one October 165 put contract. Hold it until the options expire. Identify the breakeven stock price at expiration. What is the Maximum possible loss from the transaction? What is the profit/loss if ST=185
Basic Option Strategies Profit Computation Assume the below prices for calls and puts: Call Put Strike Jul Aug Oct Jul Aug Oct 165 2.7 5.25 8.1 2.4 4.75 6.75 170 0.8 3.25 6 5.75 7.5 9. 1. Buy one August 170 call contract. Hold it until expiration. Identify the breakeven stock price at expiration. What is the profit/loss if ST=190? What is the maximum profit? 2. Buy one October 165 put contract. Hold it until the options expire. Identify the breakeven stock price at expiration. What is the Maximum possible loss from the transaction? What is the profit/loss if ST=185
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Basic Option Strategies Profit Computation
Assume the below prices for calls and puts:
Call
Put
Strike
Jul
Aug
Oct
Jul
Aug
Oct
165
2.7
5.25
8.1
2.4
4.75
6.75
170
0.8
3.25
6
5.75
7.5
9
Buy one August 170 call contract. Hold it until expiration. Identify the breakeven stock price at expiration. What is the
Buy one October 165 put contract. Hold it until the options expire. Identify the breakeven stock price at expiration. What is the Maximum possible loss from the transaction? What is the profit/loss if ST=185
Transcribed Image Text:Basic Option Strategies Profit Computation
Assume the below prices for calls and puts:
Call
Put
Strike Jul Aug
Oct Jul
Aug Oct
165
2.7 5.25
8.1
2.4
4.75 6.75
170
0.8 3.25
5.75 7.5
9.
1. Buy one August 170 call contract. Hold
it until expiration. Identify the breakeven
stock price at expiration. What is the
profit/loss if ST=190? What is the
maximum profit?
2. Buy one October 165 put contract. Hold
it until the options expire. Identify the
breakeven stock price at expiration.
What is the Maximum possible loss
from the transaction? What is the
profit/loss if ST=185
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