Question

If the May Facebook 59 call is selling for $1.25, and the Facebook 60 call is selling for $.75, construct a bear spread using these nearby 59 and 60 calls.

Construct a table showing profit and loss if the options expire when the stock price is $0, $58, $59, $60, $61, $65, and $70, for each part of the spread, and the net profit or loss for the entire spread position.

Draw a hockey stick diagram for the spread, clearly labeling all the critical points.

Answer 1

This strategy - Bear call spread is a bearish view strategy where the investor - short call with a lower strike and long call with a higher strike.
Risk: It has limited risk and limited profit.
Investor's outlook: This strategy is used when an investor expects the underlying security to go moderately down.

Short call 59= +1.25

Long call 60 = -0.75

Breakeven Point: Strike price of short call (lower strike) plus net premium received. = 59 + (1.25-0.75) = 59.5:

Although i am not very sure about a hockey stick chart in excel, however please refer to the below if it serves the purpose:

#Please upvote, if this solution helps partially or fully.