Today to you purchase 1 european call option contract for 5, Ask an Expert

Finance

Today (T=O), you purchase 1 European call option contract for $5 on Company Z which currently trades at $50 per share. The call option expires in one year (T=12) and has a strike price of $60.

Which of the following actions at T=0 (in addition to purchasing the 1 call option) would create a combined strategy with the greatest risk? HINT: Think maximum loss.

a) Shorting 100 shares of Company Z

b) Writing one put option for $3 with a strike price of $20

c) Writing one call option for $4 with a strike price of $65

d) Writing one call option for $2 with a strike price of $75

e) Buying one call option for $3 with a strike price of $70

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92865706

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