A. An investor buys for $3 a put with strike price of $35 and sells for...

A. An investor buys for $3 a put with strike price of $35 and sells for $1 a put with a strike price of $30. What is this strategy called? What are the payoffs and profits if the stock price is above $35, below $30, and between $30 and $35?

B. The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next 3 months. You do not know whether it will go up or down, however. The current price of the stock is $135 per share, and the price of a 3-month call option at an exercise price of $135 is $10.45. I. If the risk-free interest rate is 9% per year, what must be the price of a 3-month put option on P.U.T.T. stock at an exercise price of $135? (The stock pays no dividends.) A straddle would be a simple options strategy to exploit your conviction about the stock price’s future movements. How far would it have to move in either direction for you to make a profit on your initial investment?

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago

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