Net cost of the option portfolio


Suppose you buy one Whirlpool call option with X = $30 and one with X = $40. You also sell two Whirlpool calls with X = $35. Using the prices from Table 18.1, determine the net cost of the option portfolio and then draw a new payoff diagram showing the net payoffs at expiration. Over what range of prices would you make money, and over what range would you lose money? What is your maximum possible loss and gain?

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Finance Basics: Net cost of the option portfolio
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