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Lecture 8 - Lecture 8 Option Valuation Speculating with...

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Lecture 8 Option Valuation
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Speculating with Options Suppose the price of Merck is $50 and the following option prices are observed: $50 1-month call $3.00 $60 1-month call $0.50 $50 3-month call $5.00 $60 3-month call $2.00 You believe that two months from now there is a good chance Merck will announce a cure for gingivitus. How might you speculate on this information?
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Speculating with Options Profit functions of three strategies with the same initial cost
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