Stock A is currently trading @ 5500. Christian is expecting the markets to rise from these...
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Stock A is currently trading @ 5500. Christian is expecting the markets to rise from these levels. By selling 50 Put Options of A having Strike 5600 @premium 150 each and buying 50 Put Options of A having Strike 5400 @ premium 50 each, Christian can get an inflow of the premium of 5000 and benefit if A stays above 5500. Christian's profit is below: 6000 4000 2000 0 -2000 -4000 -6000 5200 5300 5400 5500 5600 5700 5800 Q8. Discuss advantages/disadvantages of this strategy. What is the max that Christian can lose and what is the breakeven stock price? Stock A is currently trading @ 5500. Christian is expecting the markets to rise from these levels. By selling 50 Put Options of A having Strike 5600 @premium 150 each and buying 50 Put Options of A having Strike 5400 @ premium 50 each, Christian can get an inflow of the premium of 5000 and benefit if A stays above 5500. Christian's profit is below: 6000 4000 2000 0 -2000 -4000 -6000 5200 5300 5400 5500 5600 5700 5800 Q8. Discuss advantages/disadvantages of this strategy. What is the max that Christian can lose and what is the breakeven stock price?
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Answer rating: 100% (QA)
The strategy being described in the question is an options spread strategy that involves the selling writing of put options combined with the buying o... View the full answer
Related Book For
Fundamentals of Investments Valuation and Management
ISBN: 978-0077283292
5th edition
Authors: Bradford D. Jordan, Thomas W. Miller
Posted Date:
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