Robert owns 100 shares of ABC stock with a cost basis of $30 a share....
90.2K
Verified Solution
Link Copied!
Question
Finance
Robert owns 100 shares of ABC stock with a cost basis of $30 a share. The stock is currently trading at $50 a share. Robert believes the price of ABC stock will fall to $45 a share in the near future but over the longer term of 3 to 5 years, increase in value to $75 a share. Robert would like to benefit from the expected near-term decline if it occurs. Therefore, Robert writes a covered call at a strike price of $55 and a premium of $3. (e) If the price moved from $50 to $45, what would be Robert's profit/loss if covered? (3 marks) What is the maximum profit or loss Robert can incur from the call if exercised? (3 marks) What is the maximum profit for Robert if the call was not covered
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
