1) Explain and show on a diagram the profit at maturity from the following combinations of...

Transcribed Image Text:

1) Explain and show on a diagram the profit at maturity from the following combinations of positions. Please show the profit from each option or stock and the profit from the combined position on ONE graph. You should have one graph each for a, b, c, and d. Please label carefully all turning points and profit levels. To find the future value, use continuous compounding, where r is 0.01 and t is 0.0417. You can use ranges of $65, 66, 67, 68, 69...........$82 for DELL stock price at maturity. Option on DELL 71.76 71.76 71.76 Strike 70 75 80 Expiration Sep Sep Sep Call 2.25 0.10 0.05 Put 0.45 3.40 8.30 a) Buy one 70 Sep call and buy one 80 Sep Put b) Buy one 70 Sep put, buy one 80 Sep put c) Buy one 70 Sep put, buy one 80 Sep put, and buy a round lot (100 shares) of the underlying stock 1) Explain and show on a diagram the profit at maturity from the following combinations of positions. Please show the profit from each option or stock and the profit from the combined position on ONE graph. You should have one graph each for a, b, c, and d. Please label carefully all turning points and profit levels. To find the future value, use continuous compounding, where r is 0.01 and t is 0.0417. You can use ranges of $65, 66, 67, 68, 69...........$82 for DELL stock price at maturity. Option on DELL 71.76 71.76 71.76 Strike 70 75 80 Expiration Sep Sep Sep Call 2.25 0.10 0.05 Put 0.45 3.40 8.30 a) Buy one 70 Sep call and buy one 80 Sep Put b) Buy one 70 Sep put, buy one 80 Sep put c) Buy one 70 Sep put, buy one 80 Sep put, and buy a round lot (100 shares) of the underlying stock

Answer rating: 100% (QA)

w161h81pmaid47597863 To calculate the profit at maturity for each combination of positions we need to consider the payoff from each option or stock po... View the full answer