Discuss the tradeoffs between using different strike prices

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1. Assume you work for a startup company and part of your compensation includes stock options. Specifically, your starting package includes 100 shares currently worth $200/share and a call option contract for 100 shares with a strike price of $200. Provide a graph of your portfolio valueon the y-axis with the stock price on the x-axis. If the company declares a 3-for-2 stock split, how many shares do you now own, what are they worth, and what are the new call option contract terms?

2. You later leave the company but still own 100 shares. The company has been struggling and you don't believe the stock price is likely to increase soon. You would like to make some additional income over the next year by implementing a covered call. Describe how you could implement a covered call. Discuss the tradeoffs between using different strike prices, maturity dates, and option types (American vs. European) in your options strategy

Reference no: EM133086651

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