Stock with differing exercise prices or times to maturity

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Reference no: EM131844801

1. A spread is a combination of two or more call options on the same stock with differing exercise prices or times to maturity. Some options are bought, and others are sold. Consider a bullish spread option strategy where you buy a call option with a $35 exercise price priced at $4 and sell a call option with a $50 exercise price priced at $2.50. If the price of the underlying stock increases to $60 at expiration and each option is exercised on the expiration date, what is your net profit?

8.50

13.50

16.50

23.50

2. An investor purchases a stock for $28 and a put on the stock for $0.40 with a strike price of $24. She also sells a call on the same underlying stock for $0.40 with a strike price of $30 and with the same expiration date. What is the value of her portfolio, net of the proceeds from the options, if the stock price ends up at $35 on the expiration date?

Reference no: EM131844801

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