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Calculate the profit for the expiry share-prices

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Shirley buys 1,000 ANZ shares at a price of $8.47 and decides to construct a hedge using an equal number of call options with an exercise price of $7.50, and a cost of $1.00 per option. Ignoring the time difference between the purchase or sale of the option and its expiry:.

i) Construct a clearly labelled diagram showing the expiry profit as a function of share-price, from the hedged position.

ii) Calculate the profit for the expiry share-prices of $8.00 and $8.75.

Reference no: EM132577415

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