Call positions along with the total cash flow per barrel

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Reference no: EM132021222

In mid-2014 when the price of crude oil was about $100 per barrel, Continental Resources (CLR) entered into a collar position for crude oil. Specifically, they bought a February 2015 put option on crude oil with a strike price of $90 per barrel and a put premium of $4 per barrel while simultaneously writing a call option on crude oil with a strike price of $110 per barrel for a call premium of $4 per barrel. Suppose they had held this collar position until February 2015. Given the February 2015 spot price of $55 per barrel, what cash flow would CLR achieve per barrel of oil? Show the cash flows from the spot, put, and call positions along with the total cash flow per barrel.

Reference no: EM132021222

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