Discussion Post
Suppose you purchase one XYZ August 80 call contract at $4.5 and write one XYZ August 90 call contract at $0.35.
• What is the maximum potential profit of your strategy?
• If, at expiration, the price of a share of XYZ stock is $86, what would be your profit?
• What is the maximum loss you could suffer from your strategy?
• What is the lowest stock price at which you can break even?
Consider a one-year maturity call option and a one-year put option on the same stock, both with striking price $105. If the risk-free rate is 3%, the stock price is $101, and the put sells for $7, what should be the price of the call?
The response must include a reference list. Using Times New Roman 12 pnt font, double-space, one-inch margins, and APA style of writing and citations.