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Suppose that you buy a six-month call option on stock Y with an exercise price of...

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Finance

Suppose that you buy a six-month call option on stock Y with anexercise price of $80 and sell a six-month call option on Y with anexercise price of $120. Draw a position diagram showing the payoffswhen the options expire. (Hint: Determine and then add up thevalues of the two options given different share prices.)

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Payoff from call option if stock price is more than the strikeprice Stock price Strike pricePayoff from call    See Answer
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Suppose that you buy a six-month call option on stock Y with anexercise price of $80 and sell a six-month call option on Y with anexercise price of $120. Draw a position diagram showing the payoffswhen the options expire. (Hint: Determine and then add up thevalues of the two options given different share prices.)

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