Today is Aug 15 and IBM stock is trading at $50. David formulates a trading strategy using

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Today is Aug 15 and IBM stock is trading at $50. David formulates a trading strategy using IBM stock options that expire in October. He writes two options on IBM stock: one is OCT 60 call option priced at $2.00, the other is OCT 40 put option priced at $1.50. He buys two options on IBM stock: one is OCT 50 put option priced at $2.80, the other is OCT 50 call option priced at $3.50. Your task is to explain David’s net position:

At what stock prices he will make profits and at what stock prices he will incur losses?

What is the maximum profit for his strategy? At what stock prices he will maximize profits?

Related Book For answer-question

Corporate Finance

ISBN: 978-1259918940

12th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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Posted Date: Mar 17, 2023 01:43 AM

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Today is Aug 15 and IBM stock is trading at $50. David formulates a trading strategy using

Question:

Expert Answer:

Davids net position is that he has bought two options and sold two options He has bought an OCT 50 p... View the full answer

Corporate Finance

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