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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?
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