Assume that you have bought BHP October 49 some time ago when the common share price...
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Assume that you have bought BHP October 49 some time ago when the common share price was $46, the strike price of the call is $49 and each call costs you $3 (column 1). The 2nd column gives data for today's information which are self-explainable given you are taking this unit. Original Trade Current Prices BHP Common: 46 BHP Common: 54 Bought BHP October 49: 3 BHP October 49: 6 BHP October 58: 2 Table 3: Updated Market (Question A4) Each of above four follow-up actions would produce different levels of risk and reward from today onwards. Use the following table as a template to compare these alterna- tive strategies at expiration and label the best and worst strategies for each scenario. Comment on your analysis results. BHP Price "Do nothing" "Liquidate" "Roll up" "Spread" Profit Profit Profit Profit Expiration 49 or below 50 52 54 56 58 60 62 64 Table 4: Strategy Comparing (Question A4) Assume that you have bought BHP October 49 some time ago when the common share price was $46, the strike price of the call is $49 and each call costs you $3 (column 1). The 2nd column gives data for today's information which are self-explainable given you are taking this unit. Original Trade Current Prices BHP Common: 46 BHP Common: 54 Bought BHP October 49: 3 BHP October 49: 6 BHP October 58: 2 Table 3: Updated Market (Question A4) Each of above four follow-up actions would produce different levels of risk and reward from today onwards. Use the following table as a template to compare these alterna- tive strategies at expiration and label the best and worst strategies for each scenario. Comment on your analysis results. BHP Price "Do nothing" "Liquidate" "Roll up" "Spread" Profit Profit Profit Profit Expiration 49 or below 50 52 54 56 58 60 62 64 Table 4: Strategy Comparing (Question A4)
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To compare the alternative strategies mentioned in the question we can analyze the potential profits at expiration for each scenario Based on the provided table we can calculate the profits for each s... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
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