Question: Despite Teslas poor performance recently, you believe it can go lower still. You decide to short a single share of Tesla stock (TSLA). It is

Despite Teslas poor performance recently, you believe it can go lower still. You decide to short a single share of Tesla stock (TSLA). It is currently valued at $123.22 per share. In 1 month, TSLA will have their next earnings announcement, and you are hoping they will not meet analysts expectations. Assume you have an interest rate of r = 0.045 (4.5%) per annum, and that all interest is compounded continuously.

1a) Rising lithium prices cause TSLAs earnings to plummet. Their share price is currently $112.42. What is your payoff and what is your profit?

1b) TSLA price jumps to 133.69 per share. What is your total payoff and total profit?

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