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Assignment on option trading strategy

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Reference no: EM133061950

Option trading strategy

Jacob wrote one call option and one put option on FFC Corp shares. These two options  have the same exercise volume and expiration date, but different exercise prices. Both options are European options. Information on the options can be found in the table below:

Option Type

Exercise Price

Premium

Call

28

$1.20

Put

24

$1.80

a). What is the maximum profit of this trading strategy? Is there a maximum loss? Explain.

b). What is the profit/loss of this trading strategy if share price of FFC Corp is $20 at maturity?

c). At what share price(s) will Jacob break even on this trading strategy at maturity?

Reference no: EM133061950

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