3.10 You have a stock priced at $50 (which you already own). The three-month call with...

 

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3.10 You have a stock priced at $50 (which you already own). The three-month call with a strike of $55 is $1.50. The three-month put with a strike of $45.00 is $1.75. a. (3 points) How would you create a covered call and what would it cost? Why would you do this? b. (3 points) How would you create a protective put and what would it cost? Why would you do this? c. (4 points) How would you create a collar and what would it cost? Why would you do this? 3.10 You have a stock priced at $50 (which you already own). The three-month call with a strike of $55 is $1.50. The three-month put with a strike of $45.00 is $1.75. a. (3 points) How would you create a covered call and what would it cost? Why would you do this? b. (3 points) How would you create a protective put and what would it cost? Why would you do this? c. (4 points) How would you create a collar and what would it cost? Why would you do this?

Answer rating: 100% (QA)

a To create a covered call you would sell one call option for every 100 shares of stock that you own In this case it would cost you 150 to create the ... View the full answer