The common stock of a company is selling today for $53.69. Call options on the...
90.2K
Verified Solution
Link Copied!
Question
Finance
The common stock of a company is selling today for $53.69. Call options on the company expiring in 1-month with strike prices of $49 and $56 are selling for $4.80 and $0.36, respectively.
How would you form a bull call spread with the two options (state what kind of options you would buy or sell at what strike price to form a call spread)? What is the cost of each spread?
If you have $890 on hand, how many spread contracts (each contract=100 options) can you buy? Remember that you cannot buy fractional contracts.
Find the total amount of profit for a single bull call spread created using the two calls described above when for stock prices are at 45, 47.5, 50, 52.5, 55, 57.5 at expiration.
What is the maximum and minimum profit for a bull call spread created using the two calls described above?
Draw profits of both the call options along with the profit diagram of the bull call spread. Clearly label each axis and indicate which line is what.
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!
