Equity research analysts give it an equal chance to be at $177 or $250 by 1 march
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Question:
Equity research analysts give it an equal chance to be at $177 or $250 by 1 march .
You consider the following options offered by a broker :
A call with an exercise price of $185 and a premium of $15.
A put with an exercise of $145 and a premium of $15.
You Explain two possible option strategies based on this offer ; covered call or protective put;
- Illustrate which of the two option strategies is generally for protection and which is to make gains.
- Determine the pay-off and the profit realise on the covered call and protective put under each of the two price scenarios by 1 march.
- Appraise the effectiveness of a straddle and a butterfly option spread strategy in the scenario where the share price stays at its initial level of $175.
Related Book For
Financial Markets And Institutions
ISBN: 978-0132136839
7th Edition
Authors: Frederic S. Mishkin, Stanley G. Eakins
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