Reference no: EM132555179
(a) In December, you have sold General electric 60 call options at a price of $4 per option. At that time the underlying stock price is $60. After selling the price increase to S65. At the assumption point of view, suppose at S65, the call at that time is trading at $5 and suppose General motors 50 call options are trading at $2.50. affirming that General electric stock remains at $65 up to expiry. Develop the strategy that shows how this current loss situation becomes a potentially profitable situation and position through credit rolling strategy and box spread strategy. How the requirement of collateral changes.
b) (b) In October, you purchased Amazon.com 40 put option bearing premium of $2. After that the price of Amazon.com decreases from 40S to $35 per share that entails the increase in price of purchased option to $6.
Evaluate the following strategies through pay off settings:
a. Calculate the payoff under butterfly spread in which liquidation is done in one portion of strategy.
b. Develop the long tail spread and box spread through writing the put options at the same price
c. Develop some strategy with writing equivalent put options and further purchasing 2 put of almost 38 options at price of S2 and evaluate expiration outcomes at $30, $35, S38, S42, $43, S44, $46 and $52.