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Question: The common stock of ABC Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to stay in that range in the next three months. You do not know whether it will go up or down, however. The current price of the stock is $100 per share, and the price of a three-month call option on ABC stock with an exercise price of $100 is $10. The price of the three-month put option on ABC stock with an exercise price of $100 is $8.00.

a. What would be the profit/loss, if ABC stock falls to $95?

b. What would be the break-even points of your strategies?

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Basic Finance, Finance

Category:- Basic Finance
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