CH11 - Chapter 11 1. A call option with exercise price of...

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Unformatted text preview: Chapter 11 1. A call option with exercise price of $90 sells for $8. The call option has three months until expiration. The underlying asset sells for $90. A put with the same exercise price sells for $6. (a) Draw a profit profile for buying the call option. (b) Draw a profit profile for writing the call. (c) Draw a profit profile for writing the call and buying the underlying security. Compare your answer with that to part (b). (d) Draw a profit profile for buying the put. (e) Draw a profit profile for writing the put. (f) Draw a profit profile for shortselling the underlying asset. (g) Draw a profit profile for shortselling the underlying asset and buying the call. Compare this with your answer to part (f). How does this position compare to issuing a call option? (h) Draw a profit profile for buying the underlying asset and buying a put option. Compare this with your answer to part (a). (i) Draw a profit profile assuming you bought the underlying security at $80 and wrote a call (with exercise price of $90) for $8. (j) Draw a profit profile assuming you bought the underlying security at $95 and wrote a call (with exercise price of $90) for $8. (k) Draw a profit profile assuming you buy a call for $8 and buy a put for $6. (l) Draw a profit profile assuming you write a call for $8 and write a put for $6. (m)Draw a profit profile assuming you buy a call for $8 and write a put for $6. Redo assuming that the call has an exercise price of $90 and the put an exercise price of $80. (n) Draw a profit profile assuming you write a call for $8 and buy a put for $6. Redo assuming that the call has an exercise price of $90 and the put an exercise price of $80....
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This note was uploaded on 06/07/2011 for the course FIN 4243 taught by Professor Dudley during the Spring '08 term at University of Florida.

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CH11 - Chapter 11 1. A call option with exercise price of...

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