Suppose BHP decides to trade in the energy options market.
o Today's spot price of energy is $3,261.80.
o You have obtained data for the following option contracts for your analysis.
All options expire in 1 year, the risk-free rate is 5%.
Strike P         - Call premium          - Put Premium
3,229.28          - 50.887                      - 15.1764
3,250.00         - 38.086                        - 22.973
3,261.80          -31.785                         -28.405
3,265.20           -30.105                        -30.105
3,280.00           -23.491                        -38.206
3,300.00            -16.287                      - 50.887

 Using the highest in-the-money call and put option payoffs, discuss how BHP could benefit from a long-covered call, long covered put and a long straddle strategy. Draw and interpret the possible profit/loss graphs.

Answer rating: 100% (QA)

Highest inthemoney call option Strike Price 322928 Call Premium 50887 Highest inthemoney put option Strike Price 330000 Put Premium 50887 Long Covered ... View the full answer