Uses collar strategy by buying puts with strike

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Reference no: EM131070659

US Silver mines silver at a total cost of $9 per ounce. To hedge their sale price, US Silver uses a collar strategy by buying Puts with strike $9.75 and selling Calls with strike $10.25. The respective premia are P = 0.246 and C = 0.374. Assume that these premia are already in T -dollars (i.e this is their future value). a) Plot the net per-ounce profit of US Silver as a function of silver price ST at date T. What is the minimum/maximum profit US Silver might record? (Assume that silver prices will be for sure between $2 and $20 dollars in the future) b) Find the exact net per-ounce profit of US Silver if Silver price ends up at (i) ST = 9.6; (ii) at ST = 10.1.

Reference no: EM131070659

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Uses collar strategy by buying puts with strike : US Silver mines silver at a total cost of $9 per ounce. To hedge their sale price, US Silver uses a collar strategy by buying Puts with strike $9.75 and selling Calls with strike $10.25. The respective premia are P = 0.246 and C = 0.374. Assume that ..

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