Problem: Consider the following table of American option prices of ABC Company at some date when the stock was selling at $80.50. All options expire one month later.
Strike price Market price of call Market price of put
80 2.50 2.20
85 0.70 5.30
90 0.15 9.70
You will be happy to sell the stock for $90 and would like to increase your income if this goal is reached. Suggest a strategy that increases your income at the cost of giving up the upside above $90. How much does it cost you?