puts, calls, and the underlying stock (or combination). For each investor, document the (1) name of the recommended strategy, (2) the components of the suggested trade, and (3) draw the payoff as a function of the stock price.
You meet with two investors who have different expectations for stock CBD that can be addressed with various positions in puts, calls, and the underlying stock (or combination). For each investor, document the (1) name of the recommended strategy, (2) the components of the suggested trade, and (3) draw the payoff as a function of the stock price.
a. Investor A already holds CBD stock and wants to lock in gains if the stock drops below its current levels, while maintaining upside exposure.
b. Investor B wants to profit if CBD’s upcoming earnings announcement is either unexpectedly good or disappointingly bad.
c. Investor C already holds CBD stock and believes the stock will not increase much in the near term. As such, she wants to earn some extra income using options.
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