Followings are the strike prices and the relevant options prices for both put and call options. All options are of same maturity. Strike Price Option Price In $ Call Option Put Option 40 $3 $1.4 50 $2.5 $2 Suppose that an investor is interested to construct a bear spread using put option information above. If the market price of underlying at maturity is $35, complete the table below?
Followings are the strike prices and the relevant options prices for both put and call options. All options are of same maturity. Strike Price Option Price In $ Call Option Put Option 40 $3 $1.4 50 $2.5 $2 Suppose that an investor is interested to construct a bear spread using put option information above. If the market price of underlying at maturity is $35, complete the table below?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:QUESTION 20
Followings are the strike prices and the relevant options prices for both put and call options. All options are of same maturity.
Strike Price
Option Price
In $
Call Option
Put Option
40
$3
$1.4
50
$2.5
$2
Suppose that an investor is interested to construct a bear spread using put option information above. If the market price of underlying at maturity is $35,
complete the table below?
ST K
f (premium, price,
value)
Option Position
Net Pay off
$35 $
24
%$4
$35 $
Strategy cost
%24
Strategy Pay off
2$4
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