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Concept Problem) Many option traders use a combination of a money spread and a calendar spread called a diagonal spread. This transaction involves the purchase of a call with a lower exercise price and longer time to expiration and the sale of a call with a higher exercise price and shorter time to expiration. Evaluate the diagonal spread that involves the purchase of the October 165 call and the sale of the August 170 call. Determine the profits for the same stock prices you previously examined under the assumption that the position is closed on August 1. Use the spreadsheet to find the profits for the possible stock prices on August 1. Generate a graph and use it to estimate the breakeven stock price at the end of the holding period

Basic Finance, Finance

  • Category:- Basic Finance
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