You purchase one (1) call option with strike price 50 for $ 9 and write three (3) call options with strike 60 for $ 3. 

1) Draw the payoff and profit table for this strategy at maturity.

 

2) When do you break-even (profit=0) at maturity?

 

3) What are your anticipations about the stock at maturity (when do you make money)?

 

4) Assume that you may purchase calls with strike price 70 for $ 1. How many options would you trade to prevent unbounded losses at maturity? What would be the maximum extent of your losses after the purchase?

Answer rating: 100% (QA)

lets analyze the options strategy step by step 1 Payoff and Profit Table Lets assume the underlying stock price S at maturity can take any value from ... View the full answer