The price of a stock is $40. The price of a one-year European put option on the stock with a strike price of $30 is quoted as $7 and the price of a one-year European call option on the stock with a strike price of $50 is quoted as $5. Suppose that an investor buys 100 shares, shorts 100 call options, and buys 100 put options. What is the investor's P&L if the share price is $40 at the expiration date of options? (Loss is written in negative number)
The price of a stock is $40. The price of a one-year European put option on the stock with a strike price of $30 is quoted as $7 and the price of a one-year European call option on the stock with a strike price of $50 is quoted as $5. Suppose that an investor buys 100 shares, shorts 100 call options, and buys 100 put options. What is the investor's P&L if the share price is $40 at the expiration date of options? (Loss is written in negative number)
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
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Transcribed Image Text:The price of a stock is $40. The price of a one-year European put option on the stock with a
strike price of $30 is quoted as $7 and the price of a one-year European call option on the stock
with a strike price of $50 is quoted as $5. Suppose that an investor buys 100 shares, shorts 100
call options, and buys 100 put options. What is the investor's P&L if the share price is $40 at the
expiration date of options? (Loss is written in negative number)
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