1 . You are bearish on a stock and are considering entering into a bear spread option...
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Question:
You are bearish on a stock and are considering entering into a bear spread option strategy. If you go long a put with a strike price of $ for $ and go short a put with a $ strike for $ Your gross payoff from the strategy will and your up front cost will
a Not be capped, increase to $
b Capped at $ decrease to $
c Not be capped, decrease to $
d Capped at $ increase to $
You are bullish on a stock and are considering entering into a bull spread option strategy. If you go long a call with a strike price of $ for $ and go short a call with a $ strike for $ Your gross payoff from the strategy will and your up front cost will
a Not be capped, increase to $
b Capped at $ increase to $
c Not be capped, decrease to $
d Capped at $ decrease to $
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