1. Draw a picture of the payoff of the option strategy at expiration as a function of the stock price. 2. Draw a picture of the investor's profit as a function of the stock price.
1. Draw a picture of the payoff of the option strategy at expiration as a function of the stock price. 2. Draw a picture of the investor's profit as a function of the stock price.
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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I am confused as to why there is no profit analysis in the short-term, as well as loss analysis in the long-term.
Transcribed Image Text:Consider the following option strategy:
● Long one call with $100 strike price, bought for $11
● Long one call with $90 strike price, bought for $20
Short one call with $105 strike price, sold for $8
● Short one call with $95 strike price, sold for $16
1. Draw a picture of the payoff of the option strategy at expiration as a function of the
stock price.
2. Draw a picture of the investor's profit as a function of the stock price.
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