Continue from previous question: "A call option on Apple corp. shares with an exercise price of $150 per share, expiry in two months, is currently trading at $2. The put option with the same exercise price and date is also trading at $2."

1. Your friend is very excited. He found an easy way to get rich: “Long a put and a call with the same strike price and one of them will always be in the money!!!!” You can use your pay-off diagram(s) to explain the error in his plan.
2. Beyond which share prices does your friend’s strategy become profitable? Remember: He paid for BOTH options

Answer rating: 100% (QA)

Your friends plan of buying both a put option and a call option with the same strike price and expecting one of them to always be in the money is flaw... View the full answer