Assuming all 8 options are held until maturity what is i

Reference no: EM13602503

The current price of a non-dividend paying stock is 40 and the continuously compounded risk-free rate of return is 8%. You enter into a short position on 3 call options, each with 3 months to maturity, a strike price of 35, and an option premium of $6.13. Simultaneously, you enter into a long position on 5 call options, each with 3 months to maturity, a strike price of 40, and an option premium of $2.78. Assuming all 8 options are held until maturity, what is (i) the maximum possible profit and (ii) the maximum loss for the entire option portfolio?

Reference no: EM13602503

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