Reference no: EM133069358

Question -

i. You buy 2,000 4-month call options at $3 each and sell 2,000 4 month call options on the same share at $2 each. The first option has an exercise price of 60 while the second option has an exercise price of 80.

a. What do you call this strategy?

b. Calculate your total profit/loss if the market price of a share on the date of expiry of the option is $45, $40, $60, $70, $80 and $90.

ii. You sell 3,000 put options at $2 each and 3,000 call options at $3 each. The exercise price of one put option is $60 and the exercise of one call option is $70. Calculate you total profit/loss for each of the following prices: $50, $55, $60, $65, $75 and $80.