3. Suppose you buy a call and put option that has the same strike price of $75 and same maturity. Call costs $5 and put costs $4. Graph the profits and losses at expiration for different stock prices? (You need to draw call and put in the same graph) If the stock price at maturity is $80, what is your profit or loss?
Please find below the graph for each of the options
The table for the data for this graph is given below
|Price of Stock||Put Option Profit||Call Option Profit|
As can be seen, if the stock price is 80, we lose -4 on the put option and there is no profit/loss from the call option. So overall loss of 4$ is observed at the stock price of $80
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