Continue from previous question: A call option on Apple corp. shares with an exercise price of $150
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Question:
Continue from previous question: "A call option on Apple corp. shares with an exercise price of $150 per share, expiry in two months, is currently trading at $2. The put option with the same exercise price and date is also trading at $2."
- Your friend is very excited. He found an easy way to get rich: “Long a put and a call with the same strike price and one of them will always be in the money!!!!” You can use your pay-off diagram(s) to explain the error in his plan.
- Beyond which share prices does your friend’s strategy become profitable? Remember: He paid for BOTH options
Related Book For
Essentials of Business Analytics
ISBN: 978-1285187273
1st edition
Authors: Jeffrey Camm, James Cochran, Michael Fry, Jeffrey Ohlmann, David Anderson, Dennis Sweeney, Thomas Williams
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