a call on that stock to his position. Suppose you are given the following inputs: So...

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a call on that stock to his position. Suppose you are given the following inputs: So Call Premium Call Strike $52.00 $2.50 $54.00 Graph the net profit (not the payoff) for the stock, the short call, and the entire covered call position. Vary S, from $48 to $58 in increments of $1. Note: The graphs come out a lot better if you use X-Y Scatterplots and uncheck "Smoothed Line" Look first at the net profit from the stock alone. What happens to the investor's net profit after he shorts the call? What does he gain? What does he give up? Why might he follow this strategy? a call on that stock to his position. Suppose you are given the following inputs: So Call Premium Call Strike $52.00 $2.50 $54.00 Graph the net profit (not the payoff) for the stock, the short call, and the entire covered call position. Vary S, from $48 to $58 in increments of $1. Note: The graphs come out a lot better if you use X-Y Scatterplots and uncheck "Smoothed Line" Look first at the net profit from the stock alone. What happens to the investor's net profit after he shorts the call? What does he gain? What does he give up? Why might he follow this strategy?

Answer rating: 100% (QA)

Lets define the parameters provided S0 the initial stock price 5200 Call Premium the price received for selling a call option 250 Call Strike the strike price of the call option 5400 Were asked to gra... View the full answer