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You have been following the shares of Alcoa, a major aluminum producer. It is currently the beginning of December and three weeks before an anticipated strike in the aluminum industry. Alco stock is traded at 55 7/8. You anticipate a moderate fall towards the end of the month. Therefore you decide to implement a bear call spread strategy with the 50 and 55 calls. Given the following prices for Alcoa's January calls, implement a call strategy and show graphically why you would profit if your anticipations were correct.

Alcoa January Calls

Strike Price

50 5.5

55 2

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M941069

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