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The price of a stock is 435. the price of a one ye...

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Question

The price of a stock is 435. the price of a one year European put option on the stock with a strike price of $40 is quoted as $8 and the price of a one-year European call option on the stock with a strike price of $33 is quoted as $4. Suppose that an investor buys 100 shares, short 100 call option, and buys 100 put options. Draw a diagram illustrating how the investor's profit or loss varies with the stock price over the next year. How does your answer change if the investor if the investor buys 100 shares, shorts 200 call options, and buys 200 put options? ( note: i think this kind of diagram called ( Bear Spreads), also please, show every critical number and any line related to the Question .,The price of a stock is $35. not 435

 

Paper#4133 | Written in 18-Jul-2015

Price : $25
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