1. Suppose Google stock is currently $1043 a share. Suppose these are the options prices at different strikes for December 18, 2023:

 

		Calls	Puts
Strike	$ 1030	$    50.11	$    31.32
	$ 1035	$    47.21	$    33.51
	$ 1040	$    44.41	$    35.81
	$ 1045	$    41.71	$    38.20
	$ 1050	$    39.10	$    40.75

 

a. Draw the payoff structure you would have had for buying the call option with a strike price of $1050 (and expiry of December 18, 2023, in case that wasn't obvious):

b. Draw the payoff structure for having bought the put option with a strike price of $1050 (and expiry of December 18, 2023).

c. Draw the payoff structure for buying one share of Google (at the then current price of $1043) along with one put option with a strike price of $1050.

d. Draw the payoff structure from buying the put with a strike price of $1050 while selling the put with a strike price of $1030. Explain why an investor might put on this strategy (which is called a bear put spread - it has nothing to do with Yogi Bear and Boo Boo).

Draw the payoff structure from having bought one share of Google and having sold one call with a strike of $1050 (this is called a covered call). How does the payoff compare to just buying the stock outright? 

Answer rating: 100% (QA)

a The payoff structure for buying the call option with a strike price of 1050 would look as follows 1c Copy Payoff Stock Price In this case the investors payoff is limited to the premium paid for the ... View the full answer