Use the information in the table to answer the following questions. Create one spread per question from the prices in the chart. Create only one option spread for each question. For example, if you were going to create a covered write you might want to buy 100 shares at $91 and write a May 100 call against it. Please use the option below to answers the questions.

Calls Puts

May – 85	$7.50		May – 85	$1.50
May – 90	$4.20		May – 90	$3.10
May – 95	$1.90		May – 95	$5.90
May – 100	$0.75		May – 100	$9.80

a). If you have a credit from creating the spread (the value of what you sold is greater than what you bought) what is your profit or loss if the stock goes down? Create a vertical ratio spread

b). Where do you make your maximum profit?

c). Above what point do you start to lose money?

d). Is this a high or low volatility spread?

Answer rating: 100% (QA)

A B D E G H K May90 42 May90 31 90 90 973 1028 6 827 Solver Parameters 7 Solver Parameters 95 872 95 ... View the full answer