Question: Roy constructs an options portfolio based on the MXC stock. He writes a call option with an exercise price $74 and writes a put option

Roy constructs an options portfolio based on the MXC stock. He writes a call option with an exercise price $74 and writes a put option with exercise price $70.

Both options have the same expiration date.

MXC Call MXC Put
Option price $0.42 $0.58
Exercise price $74 $70

a. Draw the payoff diagram of this portfolio at option expiration as a function of MXC stock price at that time. b. What will be the profit/loss on this position if MXC is selling at $72 on the option expiration date? What if MXC is selling at $77? c. At what two stock prices will Roy break even on his position?

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