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Construct a clearly labelled diagram

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Reference no: EM132347022

Gill buys 1,000 shares at a price of $28.00 and decides to construct a hedge by writing an equal number of call options, with an exercise price of $27.00 and a premium of $1.40 per option. Ignoring the time difference between the purchase of the option and its expiry: 

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

ii) Calculate the profit for the expiry share-prices of $26.00 and $30.00.

Reference no: EM132347022

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