your client believes the share price of IBM Ltd., currently selling at $45 a share, could...
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your client believes the share price of IBM Ltd., currently selling at $45 a share, could move substantially in either direction due to an on-going acquisition negotiation on price, which is expected to finalize in November 2015. You observe the following market information on IBM options: the exercise price for a put and call option is 45 dollars premium of the put option is $2 and the premium on the call option is $3 50 1. what is the strategy he will use (2 point) 2. what is the max loss (2 point) 3. what is the max profit (2point) 4. what is the breakeven (3point) Market price 35 40 45 60 70 5. draw the diagram the will show the pay off and max profit max loss ,Breakeven if prices are (4point) your client believes the share price of IBM Ltd., currently selling at $45 a share, could move substantially in either direction due to an on-going acquisition negotiation on price, which is expected to finalize in November 2015. You observe the following market information on IBM options: the exercise price for a put and call option is 45 dollars premium of the put option is $2 and the premium on the call option is $3 50 1. what is the strategy he will use (2 point) 2. what is the max loss (2 point) 3. what is the max profit (2point) 4. what is the breakeven (3point) Market price 35 40 45 60 70 5. draw the diagram the will show the pay off and max profit max loss ,Breakeven if prices are (4point)
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Answer rating: 100% (QA)
Answer 1 The client will likely use a long straddle strategy 2 The maximum loss is the total premium ... View the full answer
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