Question: Three different call options on the same stock with the same expiration date have the following strike prices and option prices: Strike Price Call Price
Three different call options on the same stock with the same expiration date have the following strike prices and option prices:
| Strike Price | Call Price |
| $90 | $22.70 |
| $100 | $16.20 |
| $110 | $13.70 |
A. Construct a payoff table and draw a profit diagram for an option strategy where you buy 1 $90 call, buy 1 $110 call, and write 2 $100 calls. B. Calculate the payoffs and profits assuming the spot price is $98 at expiry. C. What is/are the breakeven price(s), maximum reward, and maximum risk? D. Describe in what circumstances it might make sense to invest in this package?
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