You expect that the price of microsoft msft current price, Ask an Expert

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You expect that the price of Microsoft (MSFT, Current price: $53) stocks will fall in future and want to write MSFT September 50 call option at $5.00. However, you want to hedge your risk by purchasing MSFT September 60 call option which is traded at $2.00 at the market. (1) Calculate your total payoff per contract when the stock price will fall/rise to $40, $45, $50, $55, $60, $65, and $70, respectively. (2) Draw the payoff chart for your investment. (Hint: this strategy is called as “bear spread.”)

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91782212

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