In June 2003, an investor is convinced that the SUPER BIO share price will be at...
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In June 2003, an investor is convinced that the SUPER BIO share price will be at least $60 on the third Friday of October 2003. To take advantage of this situation, while reducing his risk, he decides to execute the following spread: Purchase of twenty call option contracts October 2003/$60 at $8.25 and sale of twenty option contracts purchase October 2003/$70 at $3.50. Determine the maximum gain he can make and the maximum loss he can incur. (Show the results on a diagram). In June 2003, an investor is convinced that the SUPER BIO share price will be at least $60 on the third Friday of October 2003. To take advantage of this situation, while reducing his risk, he decides to execute the following spread: Purchase of twenty call option contracts October 2003/$60 at $8.25 and sale of twenty option contracts purchase October 2003/$70 at $3.50. Determine the maximum gain he can make and the maximum loss he can incur. (Show the results on a diagram).
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Answer rating: 100% (QA)
The investor is executing an options spread strategy known as a bull call spread This involves purch... View the full answer
Related Book For
Entrepreneurial Finance
ISBN: 978-1305968356
6th edition
Authors: J. Chris Leach, Ronald W. Melicher
Posted Date:
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