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What will be net loss per share on a covered call strategy

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Reference no: EM132741399

Problem 1: On December 21, 2020, you purchased 100 shares of ABC company at $11 per share. You plan to sell your shares on December 21, 2021 and are concerned about downside risk. A put option on ABC stock with an exercise price (K) of $40 is currently priced (P) at $2 per share. Also, two call options on ABC stock with exercise prices (K) of $40 and $65 are priced (C) at $2.5 and $1.50 per share, respectively. All options expire on December 21, 2021. What will be net profit/loss per share on a covered call strategy (use K=$40 call) if the stock price is $55 per share?

1. $11.5
2. $29.5
3. $31.5
4. $34.5

Reference no: EM132741399

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