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1 2 3 4 5 6 7 8 9 10 Call price 11 A B Raider stock price 12 at option expiration, ST 13 14 15 16 17 18 19 20 21 22 23 0 10 20 30 40 50 60 70 80 90 100 C What is their combined profit at any S, and what is going on here? ANSWER 8.20 Holder's profit D Two-Sided Transaction Two investors have taken opposite sides of a call option (X=50) on Raider's stock price. For a range of possible terminal stock prices (S₁) find the profit for the long position and the short position. Find the combined profit as well and make a graph. Writer's profit E Combined Profit F G H 1 2 3 4 5 6 7 8 9 10 Call price 11 A B Raider stock price 12 at option expiration, ST 13 14 15 16 17 18 19 20 21 22 23 0 10 20 30 40 50 60 70 80 90 100 C What is their combined profit at any S, and what is going on here? ANSWER 8.20 Holder's profit D Two-Sided Transaction Two investors have taken opposite sides of a call option (X=50) on Raider's stock price. For a range of possible terminal stock prices (S₁) find the profit for the long position and the short position. Find the combined profit as well and make a graph. Writer's profit E Combined Profit F G H
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